Mike Ginsberg: Recovery Managers and Collectors Pay Attention to the Details when Forecasting

Mike Ginsberg

2012 was an eventful year. As 2013 begins, here are 4 areas to watch closely:

Tax Season May Come Late This Year

Tax season for collections may come late in 2013 and we have the Federal Government to thank.

Because of the debt ceiling impasse last year, income tax refund checks will be delayed as Washington seeks to pay essential bills first and until political differences on Capitol Hill are settled.  Normally February is a high income tax refund month and, as a result, collectors see a spike in recovery efforts.   Many people who expect refunds file as early as possible.  The IRS already pushed back the first day to file until January 30 – 8 days late – as it sorted through the tax changes Congress proposed following the fiscal cliff issue.  Adding fuel to the fire, consumers will start to see take-home pay go down later this month after expiration of a payroll tax break resulting in the increase of Social Security withholding from 4.2% to 6.2%.  This may hamper some collection efforts as consumers adjust their spending ways.

Sluggish Job Market Slows Economic Improvement

The US job market finished 2012 with employers adding 155,000 jobs in December, similar results compared to the past 2 years.  The unemployment rate stayed at 7.8%.  The private sector added jobs while government job losses continued, particularly among state and local governments.  The hiring rate has to spike up significantly in order to begin forecasting improvement in collection efforts.  The silver lining is that state and local governments will continue to turn to collection agencies to manage their recovery efforts.

Consumer Debt is Rising on Cars and Education

Tides continue to turn as more Americans borrow to buy cars and attend college and use their credit cards less.  The Federal Reserve said consumers increased borrowings in November by $16 billion from October to a record $2.77 trillion.  Auto and student loans increased $15.2 billion while credit cards increased just $817 million, highlighting a continuing trend that began a few years back.  Four years back, Americans carried $1.03 trillion in credit card debt, a record.  That figure is 16.5% lower.  At the same time, auto and student loans are up whopping 22.8%.

What to expect from Mergers and Acquisitions in 2013

M&A is alive and well in the ARM industry. Next week, we will be releasing the Kaulkin Ginsberg Q4 2012 Outsourced Business Services Sector Review, a report that will tally up all of the latest figures in M&A.  We are expecting another active year for M&A in the ARM industry, fueled by regulatory changes, diversification, cheap financing, expiring non-compete agreements, and expansion opportunities within certain asset classes.  For more details on 2013 M&A, read Michael Lamm’s latest blog post.