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Brighter Times for Debt Collection Agencies

Are debt collection agencies getting back on track after the recent financial downturn?

In short, the answer would appear to be yes. In an industry survey by ARM, debt recovery agencies have tended to experience a stronger third quarter in the year than for the second quarter.

The Accounts Receivable Management Industry also has companies claiming stronger third quarter performances and all are expecting a brighter fourth quarter as the economy begins to move forwards again.

The early results for insideARM’s quarterly Credit & Debt Collection Industry Confidence Survey for Fall 2009 show a slight turnaround from the gloomy results seen in Summer 2009.

Most ARM survey takers reported better performance than in the last few quarters. When asked to rate their firm’s performance in the third quarter of 2009 on a scale of 1 to 5, with 5 being the best, collection agency participants reported an average score of 3.21, compared to the 3.08 reported for the second quarter. Likewise, debt buyers reported an improved average performance rating of 3.13 in Q3, compared to 3.03 in Q2.

Despite the increase in performance ratings, ARM firms are still reporting a historically challenging collection environment. In comments encouraged on an open-ended question about performance, many survey participants struck a familiar refrain:
“COLLECTION RATES CONTINUE TO BE WELL BELOW 07 & 08” – Collection Agency participant
“Accounts are not as collectable, probably 60% of what they used to be.” – Collection Agency participant
“Consumer recoveries are down 20%.” – Collection Law Firm participant

“Liquidation rates are down 25-40%.” – Debt Buyer participant

Placement volumes, however, are way up, according to the survey participants so far. More than 55 percent of collection agency participants said that placements were up “moderately” (40 percent) or “significantly” (15.8 percent) from the second quarter.