Recently, the debt collection industry has garnered a lot of attention in the media. The industry is undergoing a significant transformation, with the need for a new and modernized approach to how it operates. In this article, we will examine both the good and the bad of the current state of the debt marketplace.
- Bad actors are being exposed: With many businesses slowing down, it is natural that those who engage in unethical and illegal practices get squeezed out. Dishonesty, double selling, and non-compliance with regulations are leading to the downfall of many unscrupulous players in the debt marketplace.
- Prices of debt are dropping: With low demand and limited supply, the prices of consumer debt have decreased, making it a buyer's market. Many groups are taking advantage of this and acquiring debt at reduced prices, which they hold onto for future value.
- Companies with good business practices are thriving: Companies that conduct their business ethically and legally are well positioned to weather the storm. They have the ability to outlast the bad players in the industry and lead the way in transforming the debt marketplace for the better.
- Poor quality debt is prevalent: Gone are the days of fresh credit card debt being sold in the market. Much of the debt available is old credit card debt, toxic DDA's (Demand Deposit Accounts) due to recent scandals, and payday loans with a poor reputation. Moreover, the debt has passed through multiple owners, and much of its value has been extracted.
- Government intervention is increasing: The Consumer Financial Protection Bureau is becoming more aggressive in pursuing debt collection violators and pushing for greater consumer protection.
- Sales are down: With increased legal pressure, debt sales (especially for small buyers) have been severely impacted. Large companies are working with large banks directly, leaving little room for resale, which is hurting small debt markets. Other debt types have been limited due to legal issues and the negative reputation of certain debt collectors. Originators are wary of selling their debt, and buyers are hesitant to resell their debt.
Going forward, the debt marketplace will require a complete overhaul for companies of all sizes. Adapting to new innovations, markets, and ideas will be crucial for survival and success in the consumer receivables market.
In conclusion, the debt collection industry has undergone a significant shift in recent months, and the future of the industry will require a paradigm change for companies to survive and thrive. Consumer collections have become increasingly important, and it is essential to understand the events that have led to the current state of the debt marketplace.