Collection companies are not immune to today’s recession. From the beginning of last year, they began to suffer from declining liquidation performance, staffing cuts, and increased placements.
In January 2009, the U.S. savings rate shot up and continued to spike. By May 2009 the rate was the highest level of savings by consumers in sixteen years.
Generally, an increase in the U.S. savings rate would mean that debtors will be more fiscally responsible and try to pay off debts that they may owe in case of an unexpected bad turn of events. Unfortunately the first half of 2009 has shown us that this is not what is going to happen and the collections industry shouldn’t expect it to.
One factor that makes the situation worse is that the sustainability of savings growth is quite doubtful because a part of the increase was the result of the Obama stimulus package, which sent one time only disbursements to consumers. Also, in today’s economy any type of consumer savings may be considered a means to keep heads afloat as opposed to future planning. And although savings boost personal income, they slow down consumer spending.
For the first time, collections agencies need to change their focus intensely. Its not that consumers won’t pay, it’s that they can’t pay. So, the future success of collection companies is depending on U.S. economic recovery.
That being said, informed conclusions can be drawn about the future growth in the collections industry. Better employment opportunities would be an invaluable gain for the collection industry. If debtors have jobs, they are more likely to resolve their issues. Renewed consumer confidence and spending would be a tremendous boost.
There is an impending tide of pro-consumer reforms that the collection industry can do little about. How it can truly affect change would be the quality of responses they give, and that they are carefully considered and level-headed. Finally, increased access to credit is a necessity for the collections industry. .
Mallory Megan is employed by a debt collection company. She also composes stories on business and finance, consumer spending and collection agencies.
