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DCS Keynote 2012
Transcript of DCS Keynote 2012
Debt Collection Agency by Mike Ginsberg Collections Industry Client Evolution Old Time Clients As clients have grown, so too have their needs evolved. Today's Playing Field Before 1920, the farm barter system gave rise to the earliest forms of debt collection in the U.S. 1920s and 30s
Small collection agencies proliferated throughout the U.S.
NCO traces its roots to 1926. Late 1930s
U.S. retailers developed charge accounts expected to be repaid over extended periods.
ACA was formed in 1939. After 1945, the practice of extending credit grew with the post-WWII economy. 1951
The predecessors of Visa and MasterCard came into existence.
Consumer credit at $19 billion. 1960s
Debt buying traces its roots to the isolated retail stores. 1970s
The modern U.S. credit industry was coming into its own.
Consumer credit at $127 billion.
Debt buying traces its roots to the bankruptcy courts in the late 70s. 1980s
Debt buying in the United States began in earnest when the RTC sold delinquent credit card debt to fund the government’s bailout of failed savings and loans. Before 1990, collection companies typically serviced accounts that were 180 days past due or older. 1993
The proliferation of credit cards began. Mid to late 1990s, private equity took hold of ARM.
NCOG went public in 1996.
DBA International was formed in 1997.
Encore Capital went public in 1999 2003
The FTC started the National Do-Not-Call registry. Today's Playing Field Today's Playing Field Client Evolution Client Evolution Collections Industry Collections Industry Today's Clients Economic Conditions Economic Conditions Economic Conditions Fast Facts Fast Facts Fast Facts There are approximately 5,500 ARM companies across the U.S.
Roughly 90% of ARM companies have less than 15 full-time employees
Less than 100 ARM firms have annual revenues of $20 million or more
There are some 140,000 workers employed in the ARM sector
Debt collection topped the list of consumer complaints in 2011, some 180,000 in all
City and county governments have in excess of $40 billion of outstanding receivables (parking tickets, fines, taxes, etc)
$60 billion in the ED portfolio (including Guarantor accounts) makes the ED the most highly regarded contract in the ARM industry
Total outstanding student loans has exceeded credit card debt-expected to reach $1 trillion in 2012
The housing market crash created a wave of delinquencies, short sales and foreclosures; this has led to an increase in mortgage deficiencies and some specialists have emerged
Healthcare first party and other revenue cycle management services are growing quickly Today we will:
Look into powerful forces shaping today's collection industry
Look forward into the future of collections 1990
Off-shoring of collection jobs to India started. 2006
The U.S. housing bubble burst. 2007
The global financial crisis began. 2009
Unemployment rate hit 10.2% - highest in 26 years.
CFBP’s proposed “supervision rule” coming into focus
The FDCPA addressing out of statute (OOS) timeframes: states already changing statutory periods
TCPA restricting use of auto-dialer or prerecorded message to call a consumer’s cell phone
Truth in Lending Act (TILA) being re-evaluated 2010
Dodd-Frank Act was passed. 2011
The Consumer Financial Protection Bureau was formed. Looking Forward Looking Forward Looking Forward State and Federal legislators will continue to ratify legislation that defines the process by which ARM firms can perform their services
Clients will not tolerate compliance issues or bad press Consumers will continue reducing their debt loads, except for student loans
We anticipate no significant improvement in liquidation results in the foreseeable future Legislative & Regulatory Hot Topics Market Predictions - Regulatory Market Predictions - Customers Then... Then... Then... Now... Now... Now... Letters Payments Phones Skiptrace Email, Chat, Text Messaging Contact Management
Solutions State AGs have been aggressive in many states in their pursuit of claims/suits against ARM companies
Generally, legislative efforts seemed centered on the following:
Resident manager / in-state office requirements
Licensing / oversight of the industry
Regulation – proposed new regulations to the industry, in particular debt buying
Debt verification / documentation – seeking consumer protection by mandating account details
Time barred debt
Identity theft At the State Level Client Segments with the Greatest Growth Potential This is Not Your Daddy's
Debt Collection Agency September 12, 2012 1920s
Consumer debt became popular as the U.S. economy entered the industrial age. Today's Lesson:
History of Collections Client Segments with the Greatest Growth Potential Client Segments with the Greatest Growth Potential Legislative & Regulatory Hot Topics Legislative & Regulatory Hot Topics At the State Level At the State Level Market Predictions - Regulatory Market Predictions - Regulatory Market Predictions - Customers Market Predictions - Customers Private student loans will increase as banks, lenders and colleges/universities increase direct lending to students
Nationally, hospitals and other healthcare providers will continue to merge to cut costs, combat shrinking government reimbursement and add leverage with private insurers
Regional banks are moving back into the credit card market representing a growth area for ARM companies equipped to purchase or service this asset class Market Predictions - Clients Market Predictions - Clients Market Predictions - Clients The large ARM consolidator will become part of industry history, replaced by large players dominant in a particular market segment
Expect additional consolidation and attrition among collection agencies, collection law firms are debt buyers
Substantial barriers-to-entry will exist due to regulatory oversight, compliance and infrastructure and data security systems
Collections will again become a growth industry overall as the economy stabilizes and more governments and businesses outsource Market Predictions - Service Providers Market Predictions - Service Providers Market Predictions - Service Providers