Collection Agency Layoffs Reach Highest Level of Downturn in Q2

Accounts receivable management companies reported a record level of layoffs in the second quarter of 2009, according to the latest insideARM Credit & Debt Collection Industry Confidence Survey.

The Summer 2009 survey showed more collection agencies and debt buyers reporting layoffs since the beginning of the survey in mid-2008.

When asked, “Did you eliminate any positions or layoff workers in your company in the 2nd Quarter of 2009?” more than 32 percent of collection agencies answered yes and 41.4 percent of debt buyers said the same, a record high for any group taking the survey.

In the previous Confidence Survey, 25.7 percent of collection agencies reported layoffs in the first quarter with 33.3 percent of debt buyers cutting positions.

In and open response follow-up question, many survey participants gave their rationale for the increased layoffs:

"60% of our expenses are people. Only place to significantly cut costs."

"Only employees that share the desire to show up on time and produce consistently at a profitable level should expect to remain employed."

"Leveraging technology instead of hiring more staff to cover the inflated business. Although business is up it is uncollectable currently."

"We down sized to align with our revenue flow. We do anticipate improvements in the 1st and 2nd quarter of 2010 and will staff up to accommodate growth."

The Summer 2009 confidence survey was taken by 401 ARM industry professionals from July 17 through August 6. The full results, with all data and comments from the survey, can be found at http://www.insidearm.com/go/survey-results. Results from past surveys can also be found in the new section.

ARM companies did report better levels of performance in the second quarter. Although performance ratings were lower than in the first quarter, they significantly outpaced the performance reported in the fourth quarter of 2008, when the economy was seemingly in freefall and panic was the order of the day.

On a scale of 1 to 5, with 5 being the best performance, collection agencies rated second quarter performance with an average of 3.08, down from the 3.35 reported for the first quarter, but up from the 2.81 reported in the fourth quarter of 2008. Debt buyers gave second quarter performance an average rating of 3.03.

First quarter collection and liquidation performance was likely helped by early tax returns in late February and March, a typically good time for recoveries.

To view the complete results of the survey, including responses from creditors, collection law firms and vendors to the ARM industry, please visit http://www.insidearm.com/go/survey-results.