Mike Ginsberg: Jobs Report, Industry Conferences, and CFPB Supervision

Mike Ginsberg

Mike Ginsberg, CEO of ARM advisory firm Kaulkin Ginsberg, muses over some developments last week that will impact the ARM industry.

The latest job report comes out just before the 2012 Presidential election

The Labor Department announced on Friday that the U.S. economy added 171,000 jobs in October and that the unemployment rate increased by one-tenth of one percent to 7.9%. As an eternal optimist, I prefer to see improvements in the economy, with a labor force that added more jobs that forecasted last month and a participation rate that is inching upward, illustrating that some workers are again searching for jobs.

This bodes well for improved liquidation results for ARM professionals.  No one can dispute that there are more jobs today in America than in January of 2009.  However, when evaluating the improvements, we cannot ignore that we have far too many workers trapped in low paying, part-time jobs, and far too many workers are long-term unemployed, 7.4 million in all. These workers face a particularly difficult time finding their way back to rewarding employment and this does not bode well for sustainable improvements in collections.

October is conference time

A couple of weeks back, I spoke at CMS World Forum in Madrid about how global trends may transform everything we know about collections.  It was a chance for me to gain a firsthand perspective on the fiscal crisis in Europe. In Spain, the demand for independence in the Catalonia region, ongoing for centuries, has risen back to the top due to economic concerns about unwarranted taxation.  I experienced the tension first hand on the streets of Sol as my wife and I walked through center city where hundreds of well- educated, unemployed citizens rallied for change. Consider that Spain, the Euro Zone’s fourth largest economy, has the highest unemployment rate of 25% of the Zone with more than 5 million people unemployed. Over the past 2 years alone, nearly 1 million people left the country in search of better opportunities elsewhere.  Experts in the region believe that debt sales, dominated by large banks, financial institution and telecom companies, has experienced a huge increase in volumes over recent years and if savings banks enter the selling market, it could result in significant increases to debt sales as soon as 2013. Opportunities abound for collection agencies and debt buyers focused on the region.

Last week, I spoke at the ACA Texas Unit Meeting in Dallas. Tom Morgan always does an excellent job assembling informative speakers. LtGen. Jefferson “Beak” Howell opened the event on Friday discussing leadership by detailing his battle experiences. Pat Morris, ACA International’s CEO, gave an important update on the regulatory front. There were over 20 vendors exhibiting and I thought it was a very worthwhile event to attend.  I left asking myself two nagging questions. First, are recovery managers based in the state invited to attend?  I think they want to know what’s going on in the collection industry. Second, leaders from many of the largest Texas collection agencies were noticeably absent. Why?  Maybe I just answered my second question with my first one.

CFPB Supervision Gets the Spotlight

Last week, the Consumer Financial Protection Bureau (CFPB) confirmed that any third party debt collection agency, debt buyer, or collection law firm with revenues over $10 million per year will be subject to their direct supervision beginning January 2, 2013. The CFPB anticipates that around 175 companies will fall under its direct supervision although I don’t know where they get this number from.  insideARM will continue to keep us posted on developments as they occur.

Some provisions worth noting include:

1. Larger participants will be under CFPB supervision for at least two years.
2. Examinations will be on-site and follow the guidelines published in the final debt collection examination procedures field guide
3. A typical examination will take around eight weeks to complete
4. The largest companies under supervision can expect examinations every two years at a rough cost of around $68,000 each.
5. For companies near the middle and lower end of the revenue range, the CFPB anticipates examinations every five years with a cost of an examination to $20,000, paid in full by the company.

Kaulkin Ginsberg releases its Q3 OBS Report

Despite some significant upcoming events and their potential impact on the U.S. economy, such as the Presidential election and the expiration of the Bush tax cuts, the outsourced business services (OBS) sector continues to support an active mergers and acquisitions (M&A) market.   For the latest developments and insights, be sure to download our Q3 report:   http://www.kaulkin.com/expertise/publications/reports.php