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Home > Debt Relief Industry > Debt Settlement Goes Mainstream. InsideARM Debt Settlement Survey Out.

Debt Settlement Goes Mainstream. InsideARM Debt Settlement Survey Out.

The folks over at InsideARM recently conducted a survey of companies regarding debt settlement services.

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.

Debt Settlement Goes Mainstream. InsideARM Debt Settlement Survey Out.

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.

Debt Settlement Goes Mainstream. InsideARM Debt Settlement Survey Out.

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.
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://www.emergeamerica.com Michael Reilly, Emerge America

    Steve, there’s clearly a shift underway and I will go out on a limb and say I think we will be seeing more positive stories about debt settlement in the near future, as it becomes one of the most explored options in debt relief.  

    • http://GetOutOfDebt.org Steve Rhode

      I’m still totally flabbergasted that in 2011 we still have to try to persuade nonprofit credit counselors to educate consumers about this growing accepted debt relief option.

      And I do agree that we will see more positive stories moving forward. We went through the hard and painful task of cleaning up the less reputable companies and from this point forward hopefully the momentum will be about an effort to never let the debt settlement industry to return to what is was in 2009.

      • http://twitter.com/mstarsllc MSTARS Staff

        Agreed. SAFTI?

      • http://twitter.com/fraudsniffer CMS

        I’m actually a super supporter of what SAFTI represents!

      • http://www.emergeamerica.com Michael Reilly, Emerge America

        Agreed, that’s why Emerge America is an “Accredited Member” of SAFTI and soon all my agents will be certified NDCC specialists.

        Happy Veterans Day!!! Oooooooorah

      • http://www.emergeamerica.com Michael Reilly, Emerge America

        For the consumers sake I agree but, not for the sake of credit counselors, they have been hiding behind the curtain for a long time.

        Let’s throw this out for debate, in the last sentence of your article you state;

        “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”.

        I say this;

        Collectors interact with consumers (in most cases) over the phone anyway, I would bet it’s somewhere in the high 90 to 95 percentile so, this is a big improvement already. Breakage is another positive result of dealing with consumers in debt settlement plans. I think eliminating human intervention is a big mistake, I believe it’s where the 18 – 22 and 35% settlements come from on terms of 9 to18 months or greater leaving the consumer in saving mode for the next deal. Consumers agree to pay our fee because we agree to intercede on their behalf and explain their issues (in detail) to get the best settlement possible, not push their data out electronically to maybe get some canned result with little effort.

        I just can’t see myself pushing out highly sensitive data electronically so that another company can sort through it. I have been asked many times by collection firms and at the end of the day they deal with us when we are ready, not the other way around.

  • Angelo

    Great piece but I cant help but to think that those numbers are off though.  Being performance based for 4 years, if only 53% of creditors worked with me I would never have survived. Realistically, I’d say about 10-15% of original creditors dont work with settlement companies – until of course the account is (eventually and inevitably) sold or reassigned to another agency.  I can see why some of those polled would deny working with settlement companies – I can recall countless times where we’d call an agency and were told by one rep that they do not work with settlement companies only to call back and settle that same account with another rep. 

    Debt buyers and collection agencies are looking to begin public dialog with settlement companies to work together.  Saw it again this week at the AFCC conference and at the Evolution conference in August, it’s one or two institutionally stupid banks that are still slow to come around.  Not mentioning any names…Chase, Discover, Capital One, GE and Citi.  The funny thing is that we settle them ALL once the accounts are charged off and with a 3rd party.  Im glad to see that at least half polled answered honestly.  

  • http://www.emergeamerica.com Michael Reilly, Emerge America

    I’ve been waiting for these results, Kudos to Inside Arm for the great survey! They gave away a fully blown IPad to one lucky winner who participated in the survey, good odds 1/649 ….

    • http://GetOutOfDebt.org Steve Rhode

      See Mike, I can write good news stories about debt settlement.

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