Favorable Collection Laws Boost Scandinavian ARM Success

There has been a lot of news recently about large collection agencies based in Norway or Sweden. In fact, some of the largest ARM companies in the world are based in one of those two Scandinavian countries.

Through acquisition and organic growth, a handful of Nordic collection agencies have spread beyond the borders of their home countries to become major players in Europe and other markets around the world. Three companies stand out as leading the charge: Oslo, Norway-based Aktiv Kapital; Stockholm, Sweden-based Intrum Justitia; and Lindorff Group, also based in Oslo.

The three companies had combined revenues of more than $1.3 billion in 2007 and all have offices in at least 10 different countries, mostly in Europe. They are all also active debt purchasers, snapping up portfolios in Europe, the Americas and Asia. And all are aggressively expanding, launching ventures in larger European economies like the United Kingdom and Germany (“European ARM Giant Buys German Collector, Looks to Consolidate ARM Market,” March 7). Just today, Intrum reported it had purchased a Belgian holding company of two collection agencies (“Intrum Justitia Acquires Belgian Collectors,” March 18).

To understand how companies from countries with a combined population of less than 14 million can come to have such influence in Europe and the rest of the world, look to the laws governing collections and financial services in the home countries, says Arve Paulsen, SVP of communications at Lindorff.

“The laws in our country are very favorable to collections,” said Paulsen. “For example, the legal collection process can be done without using a law firm."

But the favorable laws go much further than that example.

Consumer data regulations in Sweden and Norway allow collectors access to information that is unheard of in many countries, said Nils Petter Kapstad, director of international debt collection with Oslo-based debt collection and credit management firm Svea Finans AS.

“Registered members of the debt collection industry have access to 98 percent of all consumer databases in the country,” said Kapstad. He noted that collectors can garner such consumer information as address and phone contacts, tax records – including income for the past three years – bank account information and other asset details. “This makes it very easy to find out if a debtor has funds and income to pay. The industry has very good working conditions to collect money.”

Kapstad points out that access to the information is available only to properly registered collectors. In Norway, collectors are bonded at the federal level and must register with and regularly report to the Norwegian Collector Association. In addition, companies must report their financial results to the banking commission twice a year. Kapstad said Sweden has similar laws.

The favorable laws led international ARM firm TCM Group to declare Sweden the most friendly debt collection country in the world in a study released last year (“Trying to Collect Debt in Belarus? Forget About It,” March 10). Marcel van den Noord, general manager of TCM Netherlands, said of Sweden, “Information about income or the presence of debt is easy to uncover.”

However, laws governing collectors in neighboring Finland and Denmark are much stricter, said Kapstad. “Trying to collect debt in Denmark is similar to trying to collect debt in Texas or Florida in the U.S.,” he said.

This regulatory environment doesn’t help just those collection agencies with cross-border ambitions. Kapstad noted that there are many very successful ARM companies operating exclusively in the Nordic region. Stockholm-based Sergel Inkasso operates only in Sweden, Norway and Finland, yet employs more than 300 and reported revenues of more than $75 million last year.

But other markets in Europe, like the UK, France and Germany, offer the largest growth opportunities for the bigger firms. “To be a true European provider, you must have a significant presence in Germany,” Paulsen said after Lindorff announced its recent acquisitions of two collection agencies in that country.

While Lindorff, with revenues of $530 million last year, has acquired its way into other markets, Aktiv Kapital has grown in a more organic way. The company, which brought in more than $300 million in 2007, is backed by a wealthy shipping magnate. While platform acquisition has been important to Aktiv’s growth, it has also opened its own shops in new markets, including Canada and Mexico.

Paulsen noted that when his company enters a new market, it employs a “Nordic Approach” to collections, which relies heavily on technology and data usage. He said the Nordic Approach also involves engaging the debtor as a customer.

Lindorff’s expansion plans include not only entering new markets for its ARM services, but also growing its service offerings to include business process outsourcing capabilities.