Hard times offer boost for debt collectors
There’s plenty of clients, but cash is hard to find
There are furniture dealers with showrooms full of oak and mahogany, but lines of credit left unpaid. Trucking firms with debt as heavy as their massive rigs.
The agents who work the phones at Nassau Asset Management vow to send repossession teams if they don’t get something on those bills. But increasingly, the money isn’t there.
“In general, we have to work smarter,’’ said Dan Potts, vice president of receivables management at Nassau’s Wrentham office.
As the recession lengthens, the number of businesses and consumers falling behind on bills is increasing, according to collection agencies and their trade associations. Turning that new business into cash is proving to be a challenge, however.
Consumer bankruptcies totaled more than 1 million filings in the 12-month period ending March 31, a 32.4 percent increase over the previous year, according to federal bankruptcy courts. Business bankruptcies increased by 59.7 percent in the same period, totaling about 50,000 filings.
Potts said the volume of accounts at Nassau has doubled since last year, but “there has definitely been a decline in liquidity,’’ or the money that debtors are able to pay toward delinquent bills on financed copy machines, construction equipment, and industrial gear.
Still, the increase in volume has allowed Nassau to relocate to a larger office in Wrentham, and the company is hiring more staff. Since the beginning of March, Potts has brought on four new employees and is set to hire up to five more in the coming months.
A similar scenario has unfolded over the past year for American Profit Recovery, based in Marlborough, said Jeff DiMatteo, the company’s president. From December to May, his business was up 50 percent over the same period a year earlier, he said, with the increase split evenly between consumer and commercial collections.
After companies nationwide enacted rounds of recession-driven layoffs, DiMatteo said, “a lot of businesses now don’t have the internal resources to go after their growing receivables. Companies that have never thought about outsourcing are now seeing it as an option.’’
In response, DiMatteo said, his company has boosted staff by more than 20 percent, including three new collectors last month. But while accounts are up, so is the challenge of getting money on behalf of his clients.
“We’re finding that recovery rates are down about 10 percent,’’ DiMatteo said. “And there are more times we have to say that there’s just nothing there to collect.’’
In Plainville, John Tammaro, president of Debt Management Inc., said volume is up approximately 30 percent over the past year, most of it in consumer collections.
“There’s a new element of people who’ve never been unemployed in the past, who’ve never before been in debt,’’ he said.
“I would say collections have been more difficult,’’ Tammaro said. “With some, it’s getting very difficult to get them to make any kind of payment plan.’’
Still, the boost in volume equals new jobs at the collection agency. “We’re looking to hire about 12 people, probably eight collectors and three or four salespeople,’’ said Tammaro. “I expect to see a continued increase over the next 12 to 18 months, and then a level off.’’
That’s probably an accurate forecast, said Emil Hartleb, executive director of the Commercial Collection Agency Association, a trade group based in New Jersey.
In a survey this spring of the association’s approximately 100 members, Hartleb said more than half predicted the volume of accounts would either stay as high as they are or rise moderately.
“Somewhere, we’re going to see a tapering off of this increase in account placement,’’ said Hartleb. Already, he said, companies are having trouble collecting the funds that are owed. In fact, 67 percent of the association’s agencies said their recoveries have declined.
It’s unclear whether the pressure to collect harder-to-find funds has led to more unfair-collection complaints from people in debt. The Federal Trade Commission, which tracks consumer-collection complaints, said it is too early in the year to tell.
Hartleb said his trade association has not seen a rise in commercial-collection complaints, but has noticed an increase in the number of wayward consumer-collection complaint calls to his office.
Sometimes there are accounts that even an experienced collector is unwilling to pursue.
For all the stories Nassau agent Elizabeth Flodstrom hears as part of her job on the telephone, she said, she was stopped in her tracks in November by a man who had recently closed his financial services business.
“My kidneys are shutting down,’’ the man said, according to Flodstrom. “I’m going into hospice . . . and my wife is working two jobs because I can’t make any income anymore.’’
So, with the help of her boss, Flodstrom helped persuade the company’s client to forgive the $5,000 that the guy owed on copiers he had leased for his business.
“He basically had weeks to live,’’ Potts said. The creditor “conceded, which is rare.’’
