ARM Industry Confidence Slips Due to Tempered Economic Expectations

Overall economic confidence eroded in the accounts receivable management industry late last year, according to the results of insideARM’s Quarterly Credit & Debt Collection Industry Confidence Survey.

The ARM Confidence Index slipped nearly 5 percent to 60.2 in the Winter 2010 survey, compared to the results in Fall 2009. But the Winter 2010 reading was much better than the 53.7 recorded in Winter 2009, the lowest Index reading to date.

In the most recent survey, conducted January 11-22, ARM professionals grew increasingly dubious of a 2010 recovery, expressing concerns that weak collection performance will persist throughout the year. When asked to rank what they expected their company’s performance to be six months from now on a scale of 1 to 5, collection agency respondents answered with an average of 3.64, down from 3.78 in the Fall 2009 survey. ARM professionals registered a similar drop in expectations for performance 12 months down the road.

An optional question near the end of the survey helped to shed a little light on the pessimism of ARM professionals. When asked, “Do you think the U.S. economy will recover in 2010?” only 7.7 percent of collection agency professionals answered “Yes.” Triple that total (23.1 percent) said that the economy would not recover at all. Nearly 60 percent opted for a middle, but still unfavorable option (“GDP will be higher, but unemployment will remain above 9%”).

Some of the comments attached to the question were revealing:

“We will see the Economy be stable in the first 3 months and expect another short term double dip recession to happen.”
“I believe we are headed for Depression, starting 2nd half 2010.”
“Some recovery but no drastic change.”
“We are calling current times the “new now” and planning based on that.”
“I believe we have only seen the beginning of the drop in our economy.”

Collection performance was roughly flat from the Fall 2009 survey. ARM professionals reported an average collection performance score of 3.10 (on a scale of 1 to 5) in the 4th quarter of 2009, compared to an average score of 3.13 in the 3rd quarter of 2009.

On the positive side, the ARM industry seemed to be one of the few sectors that was adding jobs.

When asked if their companies added positions in the fourth quarter of 2009, 46.5 percent of collection agency professionals indicated that their company had added jobs. In addition, 52.8 percent of collection agency respondents expect their companies to be larger in six months.

Less than 20 percent of ARM companies anticipate laying off workers over 2010.

Increased payment arrangements continues to be the most popular collection strategy shift in a difficult collection environment, with 66.3 percent of ARM reporting an increase in payment arrangements. Debt buyers were the most common company type to deploy payment arrangements as 69 percent of debt buyer respondents indicating that they had tried more in the 4th quarter.

To view the full results of the Winter 2010 Confidence Survey, please visit http://www.insidearm.com/go/confidence-survey/winter10.