Talk of Stability Returns Among ARM Professionals

I believe that after nearly two years of uncertainty we are finally reaching a level of stability in the US ARM industry.  In my meetings with credit and collection professionals across the country, I consistently discuss changes in placement volumes and collectability levels with owners, executives, and recovery managers.  Most professionals feel that we are finally reaching a period of stability that we have not experienced for the past 18-24 months.  This is also being demonstrated in companies’ financial performance.

Some recurring themes are emerging from our interactions.  Let’s dive in.

First, collection professionals have for the most part expressed a sense that they’ve reached the bottom of the curve as it relates to liquidation results.  They feel they now have a better handle on the results of their collection efforts after almost two years of uncertainty as a result of a down economy, soaring unemployment, and low consumer confidence.  While we have not witnessed any sustainable improvement in the unemployment rate, increases in national unemployment levels have idled for nearly 3 consecutive quarters now which I believe has given consumers some comfort and perceived security in their own employment situation.  This in turn has spurred collection professionals’ sense that they can better gauge the results of their collection efforts.

Second, concerns about erratic placement volumes have largely been confined to collection agencies that focus on servicing credit card issuers on a first-party basis.  Some of the largest issuer clients having been cutting back their agency networks by in-sourcing ARM functions and lowering placements to external agencies.  I don’t believe that volumes have been consistently cut across all agencies and certainly not among all top issuers.  Some top agency performers, especially those who have steered clear of negative headlines, (which is a different topic but critically important) are actually experiencing increases in placement volumes even though loan originations remain sluggish. But even those agencies that had seen flat or declining placement volumes are beginning to report stabilization in their incoming work from clients.

This point was recently reinforced by NCO Group. Mike Barrist, NCO’s CEO, told insideARM.com in an interview Tuesday, that his firm had seen unevenness in volumes, especially on the first party side. Barrist noted that many clients were bringing work inhouse in the early part of the year, but now, there is more stability in placement volumes.

“I think everyone in the industry, both on the ARM and CRM side, felt some pressure on volume,” said Barrist. “But I think the good news is that we feel like we’re at the bottom of this right now. We’re seeing some good traction on the sales side and a level of stability in both volume and collectability.”

It is important to note that the same concerns did not exist for collection law firms, who have clearly been the beneficiaries of increased volumes during the recent downturn as issuers have bolstered legal approaches to collections.  Nor do the same concerns exist among agencies that service community-based accounts such as healthcare, utilities, municipalities, and even student loans.

ARM companies in these markets are actually experiencing increased placement volumes as their clients increase outsourcing efforts in response to their own financial pressures.

Stability, after months of uncertainty, seems to be the watchword among ARM professionals.