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At the close of each year, I’m routinely asked to share new year’s predictions for the accounts receivable management (ARM) industry. Several publication editors have already asked me for my thoughts on what lies ahead in 2020.

 

This year, however, I’m steering clear of the predictions game.

 

With a Presidential election in sight, more than an average amount of chaos in Washington, and a stock market that seems impervious to political winds, I’m inclined to reflect upon what we do know rather than try to predict the unknowable.

 

One thing we know for sure: 2019 was a landmark year for the ARM industry.

 

Big changes are underway, and the ARM industry is growing more complex by the day. Yet despite increasing regulatory limits and uncertainty, ARM decision makers have unprecedented opportunities to operate and compete more effectively.

 

The extent of your gains in 2020 and beyond will be determined by how well your business balances compliance, customer service, and operational efficiency. As you reflect on past wins and losses, consider these 2020 resolutions as the means to a more successful year.

 

Resolution #1: Read These Three Publications (and the Fourth if You Credit Report)

I highly recommend you set aside time to read these publications. They won’t change your life, but they may change how you approach your business.

 

  • The State of Third-Party Collections 2019: Challenges, Trends and Innovations (TransUnion) – This TransUnion Report (Copyright 2019, Transunion LLC) is the best in its class, and something that’s all too rare: an accurate, well-designed study about the third-party collections industry. Topics include relevant industry trends, collection operations and related outcomes, tools and technology, and consumer communications.  >>> Download the State of Collections 2019

 

  • CFPB Supervisory Highlights, Issue No. 18 (Winter 2019) and Supervisory Highlights, Issue No. 19 (Summer 2019) – In these reports, the CFPB shares its findings in the areas of UDAAPs, debt collection, credit reporting, and other markets subject to its supervision completed between December 2018 and March 2019 (Winter 2019) and between June 2018 and November 19 (Summer 2019). Understanding how the credit and collection industry’s chief regulator is interpreting and enforcing the law and directing remediations is a great way for you to learn what to stop doing and what you should start doing to improve your operations.  >>> Download Winter 2019 Supervisory Highlights   >>> Download Summer 2019 Supervisory Highlights

 

  • CFPB Supervisory Highlights, Consumer Reporting Special Edition (Aug 2, 2019) – Topics include the Fair Credit Reporting Act, supervision, credit reports and scores, identity theft and fraud, debt collection, banking, and financial service providers. In this special edition of CFPB Highlights, the CFPB focuses on the numerous root issues plaguing consumers and data furnishers alike.  >>> Download Supervisory Highlights Consumer Reporting Special Edition

 

Resolution #2: Reduce Your Head Count

According to the Transunion Report, the number of people employed by firms in the third-party collections industry is steadily declining. In 2007, these firms employed over 141,000 people; by 2016, that number had dropped to around 120,000.

 

While this contraction is partly the result of mergers, acquisitions, and firms exiting the market, it’s primarily driven by increasing adoption of automation and other efficiencies within existing firms. Inbound and outbound communication strategies, coupled with the use of self-service options for consumers, are already helping ARM businesses streamline operations, transition to a 24/7 service model, and increase profitability per full time equivalent.

 

The role of automation, and the extent of its use, will only grow in 2020. Firms that aren’t running lean risk getting left behind. This is one resolution you can’t afford to let slide.

 

Resolution #3: Move Up the Food Chain, and Walk Away from Out-of-Statute Debt

If you’re not collecting pre-charge-off debt, you’re behind the industry curve. More than two out of five collectors (42%) report that their company collects on pre-charged-off debt, and that number will likely continue to rise. Not only will this service increase the stickiness between your creditor clients and your firm, but if done properly, it will also allow you to sidestep the requirements of the Fair Debt Collection Practices Act.

 

if you’re collecting out of-statute debt, you’re playing with fire. It’s time to walk away for good. The CFPB plans to issue new rules for the collection of out-of-statute debt sometime in Q1 of 2020, and litigation over the verbiage required in collection notices as a condition of collecting out-of-statute debt remains strong.

 

Resolution #4: Watch the Expense Column, and Invest in Your Future

Sometimes, watching your expenses does not mean spending less. Rather, for third-party debt collectors, watching expenses means making sure you are spending money today on line items that prepare you for tomorrow.

 

If you Google the phrase “consumer delinquency rates,” you will see that consumer delinquency rates have remained at or slightly above pre-2008 Great Recession rates. Yet consumer debt is growing to worrisome levels. If history is any indicator, the credit bubble will burst yet again. You’ll want to be prepared.
“Ben Mohr, senior research analyst of fixed income at investment consultant Marquette Associates, calculated that total U.S. consumer debt hit $14 trillion in the first quarter of 2019, surpassing the roughly $13 trillion of leverage accumulated in credit cards, auto loans and mortgages and other debt back in 2008, when those souring loans and securities pegged to them helped to send global markets into a tailspin.” – Mark DeCambre, MarketWatch
There’s a clear message here for third-party debt collectors: prepare for a pending boon in the collection industry market, and start building the technology and compliance infrastructure needed to handle the increase in assignments.

 

The Transunion report reveals the following breakdown in tools and technology agencies are investing in today:

 

  • Manual skip tracing (80%)
  • Collection management software (77%)
  • Online payment portal (72%)
  • Toll-free number (63%)
  • Call recording (63%)
  • Letter vendor (57%)
  • Batch skip tracing (52%)
  • Consumer data (45%)
  • Compliance software (35%)
  • Predictive dialer (31%)
  • Interactive voice response (IVR) (21%)
  • Speech analytics (17%)
  • Other (7%)

 

ARM, collections, collection agencies

 

Resolution #5: Accept, Understand, and Embrace Real Time Payments (RTPs)

Waiting for an electronic funds transfer to clear or an ACH batch to upload and process overnight is, plainly and simply, old school. Fortunately, these scenarios may soon be relegated to the past.

 

For a number of years now, I’ve had the privilege of sharing breaking compliance stories within the collection industry. Today, I’m happy to be the first to announce this breaking story: the Federal Reserve and the National Automated Clearing House Association are well on their way to rolling out Real Time Payments (RTPs) in the U.S.

 

Real-time payment systems offer an instant, 24/7, interbank electronic funds transfer service that can be initiated through a variety of channels: smart phones, tablets, digital wallets, and the web.

 

Here’s how RTPs work. A low-value real-time payment request is initiated, enabling an interbank account-to-account payment fund transfer and secure transaction posting with immediate notification features. Posting funds are made immediately available—and by immediate, I mean within 30 minutes.

 

The introduction of RTPs in U.S. credit and collection markets will be a game changer. Make sure you’re prepared by learning all you can now and making the switch when the time comes.

 

Make 2020 a Year of Ambitious Goals and Even Greater Results

Exciting times lie ahead for the ARM debt collection industry. Even with rampant litigation raging through the consumer attorney bar, opportunities for thoughtful, resilient, nimble players (first- and third-party collection agencies, debt purchasers, and collection firms) abound.

 

At the heart of every success story in this industry is an eye toward a more efficient, profitable future and recognition of what it takes to get there: a dynamic technology infrastructure built on top of a robust compliance management system. With these strengths, you can operate efficiently, serve customers well, minimize daily compliance concerns, and become indispensable to your clients.

 

We’ve developed a roadmap of sorts to help ARM decision makers eliminate barriers to business success and accelerate their revenue and market gains. Read The ARM Ecosystem: Advancing Beyond Integration,” our free eBook, and you’ll learn how simple the process can be.

 

Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

© 2020 Ontario Systems, LLC. All rights reserved. Information contained in this document is subject to change. Reproduction of this publication is not permitted without the express permission of Ontario Systems, LLC.

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Posted by Rozanne Andersen

Rozanne Andersen, J.D., serves as Ontario Systems’ Vice President and Chief Compliance Officer. She is responsible for leading Ontario Systems’ corporate efforts and response to the CFPB’s launch of compliance examinations in the ARM industry. Rozanne's advocacy work on behalf of the credit and collection industry has resulted in landmark legislation and regulation at both the state level and the federal level with regard to the FDCPA, FCRA and HIPAA. In 2020, Rozanne was named Chief Compliance Officer of the Year (Large Company) by the international Women in Compliance Network.
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