Important Factors for ARM Professionals Formulating 2015 Budgets and Strategic Plans

Mike Ginsberg

As we enter Q4, the home stretch for the year, some ARM professionals are wrapping up their strategic planning sessions and formulating their budgets for 2015. If you read the national headlines last week, you heard that September’s U.S. unemployment rate fell from 6.1% to 5.9%, slipping under 6% for the first time since 2008. The number of long-term unemployed in the U.S. is down by 1.2 million since a year ago which, on their surface, is great news.

However, collection recovery managers and ARM professionals alike should not adjust their liquidation projections upward just yet.

Here’s why:

1. The Labor Department counted about nine million people as officially unemployed in September 2014, but failed to include another nine million people who are out of work.
2. About seven million people are working part-time but prefer full-time. Roughly two-thirds of those part-timers had their hours cut back and one-third accepted a part-time job and still looking for full-time. Fortunately, this number is declining slightly compared to last month and last year.
3. Another 2.2 million unemployed persons are not even accounted for in these figures because they are classified as marginally attached to the labor force having not searched for work in the 4 weeks before the latest survey.
4. Of all unemployed, 31.9 percent are now classified as long term. As jobless benefits run out, these people tend to drop out of the labor market which artificially improves the unemployment rate.

While we’re on the topic of strategic planning and budgeting, here are three other things to factor into your decision making process:

1. The US Department of Education continues to be quiet about contract participants and rate structure, although it is widely known that small contract recipients are being notified and pricing has been established. Large agencies should not expect ED to award their unrestricted contracts anytime soon as they recently granted an extension on their existing contract to give themselves some breathing room.
2. M&A activity shows no sign of letting up. Larger debt buyers continue to make sizeable acquisitions to expand geographic coverage. They are also quietly gobbling up smaller portfolios from established debt buyers directly. Many owners of collection agencies and partners of collection law firms are contemplating their own expansion or exit strategies. This includes performing firms as well as firms that find their operations under water due to escalating costs after losing major client business.
3. The Consumer Financial Protection Bureau will likely not get its act together on proposed rulemaking before Q2 2015. Rozanne Andersen said it best when she stated that, “there is no relief coming from new legislation posed by Telephone Consumer Protection Act or the catch-22 presented by the Fair Debt Collection Practices Act regarding voicemail messages”. This, coupled with the House of Representative’s elections looming, has curbed the appetites of even the most ardent supporters of the collection industry for introducing or supporting bills that would interfere with the CFPB’s rulemaking efforts or alienate voters.