The report predicts more activity in 2021 for the accounts receivable management industry as market conditions normalize.
1/14/2021 9:00
A new report by TransUnion and Aite Group found that collections balances declined by more than $8 billion from the end of 2019 to the midpoint of 2020. Third-party collections activity, though, is expected to increase in 2021 as the effects of the COVID-19 pandemic begin having a greater impact on the consumer credit market. The report, “A Year of Pivots, Challenges, and Opportunities: The Collections Industry in 2020,” explores how the COVID-19 pandemic has impacted the accounts receivable management (ARM) industry and what may be in store for 2021.
“The pandemic brought on a whole new set of challenges. Most notably, work-from-home mandates that many collectors were not equipped to handle,” Glen Goldstein, executive vice president of diversified markets at TransUnion, said in a news release on the report. “Collections is a major part of the consumer credit ecosystem, and our report highlights that we will see more normal conditions in 2021, which we believe will benefit the overall market.”
The report found that the number of firms that make up the third-party collections industry has steadily declined in recent years, though efficiencies are increasing. Profit margins are also increasing as 68% of collectors say they have either received payments in full, settlements in full or made partial payment arrangements.
In addition to the evolving consumer credit market, new guidelines set by the Consumer Financial Protection Bureau will likely have the greatest impact on the ARM industry in 2021. The request of the CFPB to have the industry modernize its practices will be of special importance, TransUnion reports.
“As the collections industry looks ahead to 2021, one of the few positives from 2020 is that modernization of collections practices may become the norm for more large and small agencies. Those collections agencies that make the effort to modernize will likely be the ones that can thrive in 2021,” Goldstein said.
To see all the findings in detail, download the full report.