What?s Really Going on with Collection Agencies?

The mainstream media – and even the business press – is all over the place right now in covering the accounts receivable management industry.

Just a month ago, it seemed that nearly every “broadsheet” story on debt collection was framed around how agencies are recession-proof and they were the ones raking in big bucks while the rest of America suffered through a full-blown depression.

But most recently, the narrative has changed. As more collection agencies — and their spokespeople — tell their stories, is has become clear that the ARM industry is struggling to get consumers to pay. This was punctuated by the major publicly traded ARM firms in their third quarter earnings. While earnings success was varied, all reported strained collections and increased portfolio impairments as expected collectability was adjusted.

This new debt collection reality does not prevent headlines like the one run in the Houston Chronicle over the weekend, though. Under the banner “Business is up for collection agencies,” one would expect another story like the ones from a month ago. But reading the story reveals the problems that we’ve been discussing on insideARM.com. Clearly the headline was written to draw attention.

So how are collection agencies faring right now? We know that placements are up and collection rates are down. But how is business overall?

This question is important to us. This week, we’ll be revealing the full results of our Quarterly ARM Industry Confidence Survey. The results of current conditions revealed a split in opinion between collection agencies and creditors. Banks were much less rosy on their prospects for success.

Collection agencies, meanwhile, admitted they would be modifying their collection strategies in large numbers. But they still felt that the worst was behind us and that things would get better in as little as six months.

Are collection agency operators overly confident that a change in collection strategy will carry them through the recession? Or are they truly more knowledgeable about consumer payment behavior than even their creditor clients?