insideARM Survey: Collectors Feeling Economic Pinch, But Optimistic on Future

Editor’s Note: The following discusses the preliminary results from insideARM’s Credit and Collections Executive Confidence Survey examining the impact of the weak economy on collection agencies, credit grantors and vendors to the ARM industry. Barely 48 hours old, the survey has already gotten 200 full responses, with more rolling in. After we’ve compiled and analyzed the data thoroughly, expect to see full results in the next few weeks. If you haven’t taken the survey, please click here to do so.

High levels of consumer debt and soaring food and energy prices are having an effect on collection agencies ability to collect, according to a preliminary reading of the results of insideARM’s Credit and Collection Executive Confidence Survey.

Launched earlier this week, the survey was designed to take the pulse of leaders in the industry and get their thoughts on where their businesses might be heading in the coming months and year. “We’ve obviously read a lot about the economy in the press,” said Dimitri Michaud, consumer finance analyst with Kaulkin Media, and one of the designers of the survey. “We just wanted to hear it straight from the ‘horse’s mouth.’”

Along with co-designer Michael Klozotsky, healthcare analyst with Kaulkin Media, Michaud crafted the questions to get an accurate feel for where companies in the accounts receivable management industry feel their performance is heading.

So far, of the three groups targeted in the survey – collection agencies, creditors and vendors to those groups – collection agencies are reporting the best performance and the rosiest outlook. Nearly 45 percent of the collection agencies that responded classified their current performance as “Strong” or “Excellent”, with 18.5 percent calling their current performance “Weak” or “Poor.”

But collection agencies acknowledged that certain aspects of the weak economic environment are taking a toll. When asked to rate how certain negative economic factors were impacting their business, a majority – 51 percent – of respondents said that the rise in food and fuel prices was having a “Major Effect” on their ability to collect. Another 41 percent said that high prices were having “Some Effect.” Only one firm out of the 140 collection agencies that responded claimed that high food and gas prices were having “No Effect” on performance.

When given the opportunity to write out their concerns, collection agency professionals were not bashful in their opinions. In response to the open-ended question, “What are some other challenges and concerns that you see on the rise this year for the industry?” one survey participant wrote, “Frivolous law suits over anything from debt collection to credit reporting. The consumers have the debt collection industry on the hot seat with no end in sight.”

Many of the open responses dealt with legal and regulatory challenges facing the ARM industry. Those responses are best summed up by one that cut straight to the chase: “Legislative grandstanding. Government intrusion. Political meddling.”

Vendors to the industry, such as software and technology firms, also reported that current performance was good, with 52 percent of respondents classifying current performance as “Strong,” although it should be noted that none reported “Excellent” results. But vendors were a bit more cautious about future expectations.

Those thoughts were echoed by one ARM industry vendor in an article published yesterday in the New York Times. Wil Davis, president of collection software firm Ontario Systems, told the paper that performance is great right now, reporting a 30 percent increase in sales to health care providers alone in the first quarter. But he said that in another six months, his firm would feel the pinch of a bad economy as “creditors realize that chasing people who do not have the resources to pay them is futile.” Davis noted that creditors will not spend money on debt collection technology until the economy improves.