There seem to be a few new trends in the industry relating to mergers and acquisitions. Many of the smaller collection agencies and law firms are being pushed to comply with stringent compliance measures from their clients and this is providing an opening for the sale of more and more mid sized businesses.
The trend has some particular deals happening to leverage the industries needs to reduce costs.
By this I mean that many of the deals recently completed and currently pending have been created by the need to have a cheaper call center and also by meager operating practices. Many of the issuers and larger placers of debt are asking their servicers to provide cheaper call center work offshore or nearshore. This is driving many mergers of Offshore call centers and US based call centers. the issuers want to know that the servicer can make money and also afford to work the files with intensity.
The second part of this trend is created by two factors the first the requirement of US based call centers to be SAS70 compliant. This requirement is leaving many small to mid sized in the cold. And the second driving force is meager operating practices.
So what is happening to many of the agencies and firms is consolidation or mergers. If you are intrested in better operating practices contact me for an operational assessment if you want to sell your business call me also. Phil Duff 904.687.1687

As a consultant to many Law firms and collection agencies as well as debt buyers I am aware of most of the difficulties being experienced by my clients and most of them are based on small profit margins.
The debt buyers and creditors have gotten smarter and smarter over the past decade and by slowly reducing the contingency rates while increasing the reporting, interaction and compliance requirements the returns have declined. Many of my clients are operating on single digit returns. So this means the liability is very high based on the returns and if a large lawsuit is filed against the firm those profits may disappear and leave you working for nothing.
Many of the issuers are not only becoming more complex to work for as the requirements are constantly increasing, between SAS70 and constantly changing FDCPA issues the cost to run a collection company are skyrocketing daily.
How can we all survive if the returns do not increase or the requirements do not decrease?
The trend is towards regulation and it will likely be years before this trend is reversed or changes direction. With this being said the returns will just continue to plummet.
So I guess the question is how do we get the debt placers to man up and give a higher fee? Many have done so and they have seen the results in increased profits.
The collection agents have been reduced to only working a portion of the accounts placed with them with any intensity. We all know most of the collections come from 20% of the portfolio but now many agents are only working the top scoring 20% of the file and will only call the other 80% once or twice. They score the portfolios placed and often will not even send a letter on 50% of the files. This has all been brought about by the reduced budgets the agencies have remaining after paying their clients high contingency rates and meeting their compliance requirements.
I have seen a few agencies and law firms that have had clients increase fees in order to allow the staff to dig in deeper in the portfolio. In every case where the fee was increased the netback has increased to the debt owner!
So if the netback increases as you empower the agency to spend a little more money on the portfolio why is this not the current trend?
Most of you are too young to know how fees have changed and how multiple placement levels were created so I will tell you. When I began collections in the late 70’s virtually all fees were at 33.3% and an agency kept a file forever, there were no recalls. Agencies were measured against each other for market share and the liquidation rate was the only factor considered.
Around the same time a agency owner in Long Island was working some smaller balance files and getting beat badly by the competition and slowly losing his market share. This owner realized he needed to spend more money to out collect the competition but he also realized it would cost him his profit margins and therefore was not a smart idea. This led him to create the industries first credit score and that led him to make a crazy suggestion to his disgruntled client.
He had a meeting with the national credit issuer who was displeased with his performance already and told them if they paid him 40% fees he could collect more money for them and their netback would increase. That took balls to tell your client, I can make more money for you if you pay me more!

The Bank of Mom and Dad
By Phillip W. Duff

The failure of the banks and the declining economy along with rising unemployment has left us using old school techniques to get cash. People are holding on to cash much tighter than in past years in fact the ACA stated that 50% of all debtors have the money but are not willing to let go of the cash and that debtors are using prioritiziation to determine who gets paid and who does not leaving the debt collector in the cold.
So the Bank of mom and dad has returned as a primary way to liquidate bad debts for the debtors below 30 years of age, yes 30. The numbers how that more and more families are living together with multiple generations in one household, this is expected to be further explored in the 2010 census.
Debtors are more likely to need and expect a payment plan to reduce their debt and will pay the collector who is more customer friendly first. So empowered with this knowledge how do we use this to increase collections.
First you must segment the business that is most likely to be interested in paying and can be reached via phone or letter. Then by using some old school techniques of getting the debtor to divulge their complete financial status and then following that with some sound financial advice a experienced low key collector can get the bill paid. If this is not effective the legal process is showing some movement towards liquidity as consumer confidence increase the purse strings loosen also.
It takes a highly trained collector to be able to get the full financial data from a debtor but with training it is very easy to obtain this debt changing data.
Lighthouse Consulting has developed many programs that can teach your staff to be the cash super sleuths’ needed in this economic climate. Contact us for more info.

When you are involved with a debt sale, merger and acquisition, dealing with a consultant or just a sales opportunity there are times in which you should lift your skirt a little and let the party on the other side of the table see your vulnerabilities and your processes.

Many people have a difficult time showing other people how they do business and where their weaknesses lie. When any of us do self-evaluation it is often hard to share the gory results with other people. In fact often we do not even admit our own weaknesses to ourselves. So the question is how, when and to whom do we release this sensitive information?

As a consultant I am often faced with how other CEO’s and COO’s are going to lift their skirt to me. I am the doctor so as a consultant I am one of the people to whom you should lift your skirt and lift it high when engaging for a consultation. But often I find that the managing partner or collection manager tries to hide their deficiencies from themselves and from me.

In order to make significant change happen in your organization you must lift your skirt and evaluate yourself closely. What you find will determine if you can make changes yourself or you may require help (a consultant). A good consultant will find the truth within the organization and can provide the needed change plan but until the decision maker will lift his own skirt and self-evaluate the business and personnel the changes will not be implemented and change will not occur.

If you are in a debt sale or M&A negotiation then you need to lift your skirt high enough for the person on the other side of the table to make a firm solid decision but so far as to expose your personal deficiencies. If you are in a sales opportunity it is often best to discuss the limitations of the product as well as the key positive factors.

Many people in this business refuse to lift their skirt to themselves and this has left them in the past. This group is still doing things close to the same way they were 10-20-40 years ago. There is also a group of rising businessmen that have no skirts and go around trying every new process and ideas, this group finds many jewels in the constant search but often need to find focus to gain real traction.

We all have to spend a few minutes and soul search ourselves and our businesses if you find you could use some help to make positive changes we can help.

• The way in which a consumer pays their bill will change, the movement to payments and in fact lower payments will become the norm.
• The use of offshore and near-shore collection strategies will increase in 2010
• The use of offshore will drive more US agencies to branch out to satellite offices they run in India and the Philippines.
• The use of offshore offices will begin to move to near-shore as the process seems to work but needs closer management. The use of near-shore allows for a 2-4 hour plane ride to the satellite office.
• The results of the best in class agencies and law firms will be ones who can go back to old school collections and manual calls.
• The manual calls will drive the costs up at US locations further driving the off shore strategy
• Compliance issues will only get worse in 2010
• Many agencies and law firms will create a strategy to mitigate the damages associated with the increase of lawsuits filed each month in 2010.
• The volume of consumer attorneys using the collection industry will increase in 2010 as other law firm strategies become un practical and un profitable
• Many new buyers and therefore placers of debt will enter the business in 2010
• Most of these buyers will only be marginally successful and a few will prosper and become part of the industry into 2011 and beyond.
• Many collection agencies and law firms will begin to fail in 2010 and this will create further mergers and acquisitions.
• The M&A that will occur among the debt buyers will allow the buyer to buy the entire company for a discounted price of just the debt assets. This will allow the strong to get stronger.
• The business will also lose many vendors that will not be able to survive the continued hard times in 2010
• Liquidity will increase in 2010 but ever so slowly and will not reach highs of past years ever again.
• The business will shrink as the issuers will reduce the number of buyers they are willing to deal with to reduce the compliance issues that exists in 2010
• The issuers will also reduce the number of agencies and law firms they are dealing with for the same reasons to reduce compliancy issues. By using the most trusted vendors the issuers will reduce exposure to bad collectors.
• This will also happen with the rest of the industry especially the debt buyers and this group will also lose many players ion 2010.
• The limitation of buyers by the issuers will reduce the number of resellers with fresh debt to half of what it was in 2009

Do you want to know how to stay ahead of the curve? Call me today, Phillip W. Duff 904.687.1687.

The DBA show was a record at the Mirage in 2010. The association will send me the actual numbers to compare to other years but it was obvious that the show was BIG! More vendors and more attendees than ever before.

Lighthouse Consulting sponsored a booth and it was also a high traffic location especially during the opening reception with the addition of two conference models

Deanna and Jody at the 2010 DBA booth of Lighthouse Consulting

Many people commented on the fact that the email blasts sent by Lighthouse Consulting are appreciated by the industry and it is because they have value to the end user and that is the philosophy of Lighthouse Consulting’s services. I am glad you feel there is substance to the articles an alerts, thank you for the comments.

Lighthouse Consulting, Ron Canter, Esq. and myself wish to thank you for coming by the booth and sharing opportunities to help each other with the business of debt collection. we were provide many opportunities for consulting, debt sale and compliance assistance and we are working to make contact with those persons as quickly as possible, well maybe not so quick today after 4 days in Vegas and delayed flights returning yesterday.

Please let me know what you thought of the show why was it a record turnout? Is the business growing? Was it desperation by some companies? I am very interested in your thoughts and then I will give you mine.

Post your thoughts below, no really do it,

NOW!

Thanks,

Phillip Duff

L3 Group

Lighthouse Law Leadership Group

This is an exclusive group of Law firm collection professionals who employ Mr. Duff as a mentor through an interactive connection including live voice, video and computer interface. This group of collection managers and managing partners attends a monthly cyber meeting with Mr. Duff as well as one on one weekly interactive training and question modules. Members of this exclusive group will have weekly access to the 30 years of knowledge and contacts of Mr. Duff, and all segments are facilitated directly by Mr. Duff.

• Interactive one on one live access to Mr. Duff weekly
• Monthly group meetings
• Industry insights and Vendor reviews
• Compliance advice
• Increase your profits
• Drive your revenue growth
• Results for today’s problems
• Networking opportunities

I know you have questions and I can answer them. This program can help you develop multiple processes with the direct assistance of a highly respected consultant at a highly reduced rate.

Every member of the group will get the following monthly;

• One-on-one counseling from Phillip W. Duff
• Entrance to a weekly group meeting with
• Guest speakers
• Vendor evaluations
• Networking opportunities
• Interactive webinars
• Video presentations
• Group blog
• Newsletter

This group will have a limited number of members and will remain exclusive and loyal to it’s membership. The level of access and number of members per organization will determine the cost. Acceptance of membership is solely that of Mr. Duff.

The group will be very limited and close membership quickly so get signed up today. The first meeting will begin on March 1 2010.

Lighthouse Consulting & Asset Management, Inc. is currently working on our website to better serve you. Take a look around and let us know if you have any questions or comments.