Guest Blogger: Mike Ginsberg on Emerging Legal and Regulatory Trends in ARM
by Aspect on February 6th, 2012
The following is a special guest post from Mike Ginsberg, CEO of Kaulkin Ginsberg. Mike spearheads the firm’s advisory business practices and leads a premier advisory team that helps industry owners and executives succeed in their growth, exit, and M&A strategies. Read more by Mike on InsideARM.
Eye on the Horizon: Key Trends Will Reshape ARM Industry in 2012
2012 ushers in many changes for the accounts receivable industry on every front. Since the start of the recession, economic, regulatory and market conditions have played a role in creating a new playing field for grantors, service providers and vendors.
Key trends reshaping the ARM industry include:
- Economic turbulence continues to impact liquidation results – Some reporters are stating that this must be a booming time for debt collectors as placement volumes increase and collectability rebounds. Not so fast. Yes, recovery rates have improved across most market segments over recent quarters as more consumers have paid down debts at increased rates. However, the collection industry is not out of the woods yet and executives should continue to operate prudently as the economy recovers.
- The landscape of credit card/bank card agencies is changing. – Loan origination reductions have severely impacted placement volumes, resulting in bank card/credit card collection agency vendor networks being downsized as much as 60% in 2010 and 2011 and collection law firm networks following suit over recent quarters. Top performers across most asset classes have actually seen an uptick in placement volumes as a result of contractions. As we look forward into 2012, we anticipate further placement volume reductions coupled with more compliance “asks” from credit card issuers and increased regulatory scrutiny. Strong agencies focused on performance without sacrificing compliance will benefit significantly as banks and issuers extend credit at increased rates.
- Substantial changes are looming on the regulatory and regulatory fronts – New laws and regulations will result in significant changes to workflow, technology, compliance and day-to-day operations among debt buyers and collection agencies. It is highly unlikely lawsuits against collection agencies and debt buyers will decline in 2012. We examined the trends. Establishing reasonable compliance programs, increasing the time and resources spent on collector training and using technology that is designed to prevent law violations is critical to successful navigation of the legal, legislative and regulatory environment we predict for 2012.
- Job creation, while starting to show signs of improving, remains hovering at lowest levels in 30 years. The number of layoffs is down as we head into 2012. Unemployment continues to rank as the most significant trend impacting collection efforts.
- Collection agencies are resilient – According to a recent survey conducted by InsideARM, 60% of agencies plan to increase staff levels over the next 12 months and more than 75% are projecting increased revenue a year from now in spite of economic conditions. Most agency executives are forward thinking and are positioning their agency to be the beneficiary of increased outsourcing and collectability across numerous market segments including healthcare, government, student lending, mortgages and other financial deficiencies.
For every company involved in any facet of collections and accounts receivable management, new laws and regulations—even proposed versions—will involve significant changes to workflow, technology and day-to-day operational policy. Rozanne Andersen, Vice President and Chief Compliance Officer of Ontario Systems LLC and former CEO and Vice President of Government Affairs at ACA International, is a good friend of our firm and the leading authority on this front. As Rozanne has taken stock of thousands of regulations, case law decisions and recent legislation, she successfully encapsulated the most critical trends for our industry in her full report. These trends include:
- Lawsuits against collection industry companies
- State attorneys general file lawsuits and take action
- What’s happening at the Federal and state level?
- How the new CFPB will impact ARM
- A look forward at what to expect
Rozanne and I agree that it is unlikely lawsuits against collection agencies and asset purchasers will abate in 2012. Negative press, high levels of consumer complaint filings, ambiguous laws and regulations and the resolve state and federal regulators have to fill the coffers with money extracted from the industry in the form of fines and penalties does not bode well for the industry. Establishing reasonable compliance programs, increasing the time and resources spent on collector training and using technology that is designed to prevent law violations is critical to any agency or asset buyer’s successful navigation of the legal, legislative and regulatory environment we predict for 2012.
At Kaulkin Ginsberg, we have been tracking M&A market activities and macro-level trends impacting the ARM industry for 20 years. We cover these and additional market conditions in our latest Q4 report which is available without cost on insideARM. I am happy to discuss these market conditions and how they may impact your business.
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