Settlements, Payment Arrangements Becoming the Norm in ARM Industry

Accounts receivable management companies are shifting their collection strategies to include more settlement offers and payment arrangements as debtors struggle through a recession that shows little sign of letting up on the American consumer.

In insideARM’s most recent Credit & Debt Collection Industry Confidence Survey, more than 72 percent of collection agency respondents said that they have tried “more payment arrangements” in the past six months in an effort to increase revenue. Nearly 68 percent of debt buyers responded in a similar way.

The Confidence Survey has been asking ARM companies how likely they are to modify collection strategy in the face of declining recoveries. And in the third quarter of 2009, collection agencies seemed very eager to try new approaches; more than 85 percent said that they were somewhat or very likely to modify collection strategies.

But for the first time, the Confidence Survey for Fall 2009 asked which specific strategies companies are employing.

“More Payment Arragements” was the most popular response by far to the question. But other strategies are also proving to be popular. Exactly 54 percent of collection agencies and 44.1 percent of debt buyers said that “More Settlement-in-Full Offers” were being extended to debtors. An additional 41.2 percent of debt buyers and 39.4 percent of collection agencies said that they were also trying lower SIF thresholds.

Interestingly, in a comment field attached to the question, one survey participant noted that their firm was “Allowing payment arrangements on Settlements.”

ARM firms also indicated that they were leaning on technology more in the downturn. When asked “Which of the following technologies are you considering to improve collection performance?” only 34 percent of collection agencies said that they were not adding technology.

The most popular technological enhancements among collection agencies were Business Analytics Solutions (38.8 percent) and Collection software system upgrades (37.3 percent); for debt buyers is was also Business Analytics Solutions (50 percent) and Collection software system upgrades (35.3 percent). Only 26.5 percent of debt buyers indicated they would not bring in new technology to help their collections.

For the complete results of the Fall 2009 Credit & Debt Collection Industry Confidence Survey, please visit http://www.insidearm.com/go/confidence-survey/fall09.