A New Era Dawning in the ARM Industry

As we leave 2009, I am confident we will look back over the last 12-18 months and view it as the start of a new era in Accounts Receivable Management.   

Throughout history, eras have been marked by definable beginnings and distinct endings; the Industrial Revolution, the Vietnam Era, the Dot-Com Boom, to name a few.  Not too long ago, the ARM industry experienced the Consolidator/Roll-Up Era – a defining period which saw a number of new larger companies emerge.   

This new era in ARM is being defined by sweeping changes in a number of significant fronts including:

The Economy – Double digit unemployment levels, bankruptcy levels back to pre-reform levels, a credit crunch that made it nearly impossible for many businesses to secure capital for growth or debt purchase, a mortgage crisis of gigantic proportions, and recovery rate declines of 20-50% or more for most market segments. On top of all this, uncertainty about the economic recovery continues.

The Legal and Regulatory Front – Efforts underway to overhaul FDCPA, State Attorneys’ General tirades against agencies, the TARP bailout, the formation of CFPA, and the anticipation of Healthcare Reform.   

The Credit Grantors – Banks redefining their lending practices, consumers paying down credit levels, collection strategies being reshaped, changes in student lending and the end of the FFELP program, reduction in debt sales prices and numerous no-sales, most state governments experiencing tremendous budgetary and financial crises.  

Many of these developments have the potential to fundamentally change the way recovery departments and ARM companies do business, and we’re seeing some early signs:

• Most agencies have been given the green light to more readily accept payment plans.  

• Dramatic increases in placement volumes to contingency agencies.
• Intensified legal recovery efforts.
• Longer-term prospect of less charge-off inventory from issuers.
• Negotiated transactions among debt buyers and sellers are more commonplace, replacing many competitive auctions. 
• The consumer-focused Administration is pursuing reforms that could dictate major change in compensation strategies for some bill collectors.

There is no doubt that a new era has clearly emerged.

With change comes opportunity. Some executives have positioned their ARM companies successfully and, as a result are already experiencing positive impact in the form of growth and profitability.  Others may have some catching up to do.  We will continue to do our part to scout out the important developing trends for you as this new era develops and keep you posted on developments.  In the meantime, my heartfelt wishes for a safe and prosperous New Year!

Mike Ginsberg is the leading M&A expert for the accounts receivable management industry. He leads a premier advisory team that helps ARM industry owners and executives succeed in their growth, exit, and M&A strategies. Mike and his team will be hosting a live webinar, “The State of the Industry” at EXPO 3.0 on February 16, 2010, where they will address these and other developments shaping the industry.  Admission is free, just go to www.insidearm.com/expo to register!