Mike?s Take: ARM Firms Should Weigh Anchor Decision

 
On Friday, May 16, debt buyer Portfolio Recovery Associates (PRA) announced it will be closing Anchor Receivables Management, its third-party collection operation, and will redeploy the staff to its owned-portfolio collection operations ("Portfolio Recovery Drops Anchor, Shifts Staff," May 16). I can’t say that I am surprised by this decision. In fact, I applaud it.

PRA is not the first debt buyer to shed its third party collection operations and I believe they won’t be the last. In 2006, Sherman Financial divested Ventus, its contingency collection operation. Those thinking of taking their debt buying operation into contingency collections should take note. (And vice versa, as those thinking of going from contingency collections into debt purchase should also pay attention.)

Third-party collections, commonly referred to as contingency collections, is an entirely different type of business and should be owned and operated separately from debt purchase businesses. This does not mean that the two cannot coexist. In fact this coexistence can produce meaningful cross-sell opportunities, as many credit grantors both sell debt and place accounts for collection. In addition, potential cost savings can be realized by combining redundant operating expenses. However, these businesses need to run separately to achieve maximum results. Separate financial statements and separate management and collection staffs are an absolute must. This is only the beginning of the discussion of what should be shared and what should be kept separate.

By the way, Judy and Dennis hosted another wonderful invite-only event a couple of weeks back. If you missed it, be sure to attend the Debt Connection Symposium in San Diego in September. You won’t be disappointed.