The surveys 649 respondents were mostly on the collection side of the fence so it’s interesting to see how those debt professionals feel about working with debt settlement providers.
The survey seems to indicate the willingness of debt collectors and owners to work with debt settlement companies to resolve debt owed. A large 44% of respondents said they had dedicated teams to work with debt settlement companies. While not a majority, it seems to clearly indicate that debt settlement has become enough of a mainstream solution that companies are investing dedicated staff to deal with it.
Of the companies that do not currently work with debt settlement companies, 49% of those respondents said they “would reconsider their decision to work with debt settlement companies if provided a secure, compliant, aggregated data repository of debt settlement accounts, nearly half said they would change their decision to work with the industry, further demonstrating that security, compliance, and scalability in leveraging the debt settlement industry all were more important than the perceived reputation of the industry as a whole.”
The opportunity for debt settlement companies to expand services seems to be ripe. It appears that opportunities to work with a broader base of companies in a more formally recognized way, exist. Over half of respondents said they work with ten or fewer debt settlement companies and 75% said they work with fewer than twenty.
The outlook for account performance was positive as well. The survey identified that debt settlement accounts perform well and quite better than regular consumer card accounts.
About a third of respondents said they settle a large number of accounts. Of the companies that work with debt settlement providers, 16% said they do not experience broken payment terms, 28% said the breakage rate was between 1 and 10%.
Debtors enrolled in debt settlement programs may be some of the most difficult individuals to engage in the collections process, once the consumer is engaged and actively paying toward a term settlement, the break rates on these settlements appear to be much lower than overall industry averages.
A surprising fact and one I fully anticipate seeing an upward change in is in the percentage of card issuers and debt buyers that currently report working with debt settlement providers.
I agree with the InsideARM observation on this fact.
Collection Agencies, Debt Buyers and Legal Recovery Firms appear to be the early adopters of a strategy shift to leverage the debt settlement Industry as an alternative collections channel, while Credit Card Issuers appear to be willing to surrender these accounts to third-party collectors downstream due to a lack of willingness to work directly with the industry at this point.
Card issuers are currently allowing accounts to be sold outside for significantly less than they could get if they more closely worked with debt settlement providers in either lump-sum or term settlements.
Consumer Credit Counseling groups have been trying to persuade anyone that will listen that debt settlement companies are not to be trusted but the InsideARM survey data seems to indicate that those inside the collection industry do trust debt settlement companies. Of the respondents, only 13% perceived the industry as not reputable while 15% had legal concerns about dealing with third parties, a fact that would apply to credit counselors as well.
Of the survey members that said they do not work with debt settlement companies, 14% said that once an account was identified as working with a debt settlement company it would be sent for legal recovery. Dunning notices only would be sent by 8%. The majority of accounts would be worked in collections.
What appears clear from this survey is that collection professionals appear eager to work closer with a debt settlement industry that is more cutting edge when it comes to technology and data sharing. Over 70% of interactions with debt settlement companies are over the telephone, which is grossly inefficient.
If you would like to get your copy of this survey, you can visit this link.
Debt Settlement Goes Mainstream. InsideARM Debt Settlement Survey Out. by Steve Rhode
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