In today’s recession, collection companies are not exempt. Starting last year, they first started to suffer from declining liquidation performance, staffing cuts, and increased placements.
Then in January 2009, the U.S. savings rate spiked and continued to grow. 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.
To make matters worse, the sustainability of savings growth is quite questionable because a portion of the increase was the result of the Obama stimulus package, which sent one time disbursements to consumers. Also, 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 shift their focus drastically. Its not that consumers won’t pay, it’s that they can’t pay. Therefore, the future success of collection companies is dependent on U.S. economic recovery.
That being said, savvy conclusions can be drawn about the future growth in the collections industry. Better job opportunities would be an amazing gain for the collection industry. If debtors are employed, they are more likely to resolve their issues. Renewed consumer confidence and spending would be a huge 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. .
Suffering from bad debt collection? Rapid Recovery Solution is the best bill collection agency around. Mallory Megan works for a medical collection agency.
