Debt Collection Agencies More Optimistic About Future

U.S. collection agencies reported an improved outlook for performance in the next six to 12 months and the majority are planning to hire, according to the latest results from insideARM’s quarterly Credit & Debt Collection Industry Confidence Survey.

The Fall 2009 survey, conducted October 13 – 23, showed the highest reading ever for anticipated performance 12 months out. When asked to rate their company’s expected performance in 12 months on a scale of 1 to 5 – with 5 being the best score – more than 34 percent of collection agency respondents answered with a rating of 5, the highest level ever recorded in the survey. The average of responses on the question, 4.05, was also an all-time high.

View all data from collection agency respondents

Other accounts receivable management companies shared the collection agencies’ enthusiasm. The average expected performance rating for collection law firms was higher than agencies at 4.06, while debt buyers were not far behind at 3.94.

ARM companies also indicated that they were ready to expand payrolls en masse. More than 55 percent of collection agency respondents expect their staffs to be larger six months from now, an all-time high. Only 11 percent of agencies anticipate laying off workers in the near term, an all-time low.

The positive outlook drove the new ARM Confidence Index reading to 63.1, the second-highest level recorded.

The ARM Confidence Index, launched for the Fall 2009 survey, uses responses from the quarterly Confidence Survey to create a snapshot of how ARM firms see financial performance in the next six months, based on current conditions. The Index provides a measure of industry confidence on a scale of 0 to 100 and is calculated using data from select questions in the survry, including prior quarter performance rating, current performance rating, future performance expectations, and anticipated staffing moves.

The Fall 2009 Index reading of 63.1 was second only to the Fall 2008 reading of 65.5.

Although the readings in the Fall of 2008 and 2009 were similar, they were reached in very different ways. The 2008 survey was conducted as the financial crisis was sending Wall Street into a tailspin and Congress was passing the bank bailout. Confidence was very low. But unemployment had not yet snowballed, so ARM collection performance was average to above average, keeping the reading inflated.

In contrast, ARM company confidence was at an all-time high in the Fall 2009 survey. Performance, however, was a drag on the Index reading, as unemployment reached decades-long highs. To underscore the challenges facing ARM firms in the current environment, more than 72 percent of collection agency respondents reported using more payment arrangements to increase collection performance in the third quarter of 2009.

To view the full results of the Fall 2009 Credit & Debt Collection Industry Confidence Survey, including responses from creditors and vendors to the ARM industry, please visit http://www.insidearm.com/go/confidence-survey/fall09.