Collection Companies In The Recession

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 increased and continued to increase. By the month of May 2009 the rate was the highest level of consumer savings in sixteen years.

Usually, an increase in the U.S. savings rate would mean that consumers will be more fiscally responsible and try to pay off debts that they may owe in case of an unexpected adverse event. Unfortunately the first half of 2009 has illustrated to us that this isn’t what is going to happen and the debt collections industry shouldn’t expect it to.

One thing that puts a damper on the situation is that the capacity to sustain 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.

Collections agencies need to change their focus drastically for the first time. Its not that consumers refuse pay, it’s that they can’t pay. So, the future success of collection companies depends on U.S. economic recovery.

That being said, some well thought out conclusions can be drawn about the future growth in the collections industry. Better job opportunities would be a great gain for the collection industry. If debtors are employed, they will be more likely to resolve their issues. Renewed consumer confidence and spending would be a huge boost.

Finally, increased access to credit is a necessity for the collections industry. There is an influs of pro-consumer adaptions to the law that the bill collection companies can do little about. How it can truly affect change would be the quality of responses they are giving, and that they are carefully considered and level-headed.

Mallory Megan works for a debt collection company. She also does articles on business, finance, the credit industry, and collection agencies.

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