The last few years for the debt industry have seen a downturn in available paper for purchase and working – particularly from fresh high-quality credit card and consumer loan originators. Large corporations have done well with direct deals and flow agreements, but small local shops are having to stretch for work and seek out new avenues for profitability. Below are a handful of suggestions which both debt buyers and contingency agencies may need to think about to improve their business – or simply survive the current market.
1. Tighten the belt – make sure all of your processes are in order. Check the books and see what – and who – you need to cut (or improve). Consider internet-friendly options and more modern, cheaper methods.
2. Find new, cheap equipment. With some agencies closing their doors, equipment upgrades may be available at low cost. Dialers, software, computers, telephone systems, servers, etc may be readily available from closed businesses looking to liquidate.
3. Go Local. Start working area businesses to see how they are handling their accounts receivable. See what the local title loan shops and payday loan guys are doing. One important sub-point here: START working on your local community banks to see if you can work anything they will hand you. Community banks are understandably reticent to outsource or sell paper, but the industry, as a whole, needs to begin working on the smaller banks to assist them in their workouts. Assisting local banks MAY require high standards and a more customer-oriented approach....and it is going to take a long time to begin to convince smaller banks to work with agencies and debt buyers in collecting their paper. Such work should begin now – and understand that it may take years to make headway.
4. Be willing to go outside your comfort zone. When the typical business model no longer produces revenue like it should, it needs to be revisited. Although a good argument is made for your business to stay within its core competency, when the core competency does not bring the money in the door any longer and the market changes, your business needs to change as well. For buyers, it may mean contingency work. For contingency agencies, it may mean looking to buy paper and consider new options.
5. Understand the market change may be permanent, or at least long-term. The current anti-business environment for consumer collections is likely to survive the current administration. The regulations at the state level have tightened too much. Even if the CFPB is removed completely, the states which tightened standards on debt buyers and agencies are likely to maintain the restrictions made over the past few years.
6. Get politically active – at all levels of government AND within professional organizations, such as the Debt Buyers Association (DBA) now RMA or the Association of Credit and Collections Professionals (ACA) or NARCA, Promoting pro-business candidates and staying knowledgeable about the legal environment - and promoting laws helpful to the debt marketplace – is essential for the long-term success of the industry as a whole and individual companies. A heavy push in professional organizations is also needed, as several tend to promote just the well-being of a few large corporate members over the greater number of smaller debt purchasers.
A long-term approach is needed industry-wide to change the current environment which favors debtors over collectors. Grassroots work needs to begin now, both in Congressional and courtroom halls as well as in professional organizations, which tend to favor big business relationships with each other and government. Imagination is necessary for the debt industry – particularly small shops – to survive and thrive for future profitability.