A year ago, nobody would have predicted that a virus would be what impacted the world — and the ARM industry — more than anything else. What will shape our industry in 2021? Maybe it will be something we expect, maybe it won’t. AccountsRecovery.net asked nine members of the ARM industry — Mike Frost, Larry Parks, Lauren Valenzuela, Rick Bonitzer, Chris Dunkum, Michael Klutho, Don Maurice, Garret Angelo, and Ray Peloso — what they think will have the biggest impact in 2021. Here is what they said.
Mike Frost, Malone Frost Martin
There is absolutely no doubt that the biggest impact to the ARM industry in 2020 was the COVID-19 pandemic. The stimulus assisted in recoveries but created havoc in the workplace as agencies transitioned to work from home strategies in massive volumes. What will be different in 2021? We are not out of the COVID woods yet, but I do not think it will have the same impact in 2021 that it had in 2020. New stimulus payments should help in the most important collection months of the year and the 2021 stimulus looks better than the stimulus provided in 2020. Furthermore, the vaccine is already being administered in mass volumes and as businesses reopen, placements will again will increase.
The biggest impact in 2021 on debt collection will be communication channels. Carriers are blocking outbound calls at alarming rates under STIR/SHAKEN. Millennials became the largest segment of the US workforce in 2016 and are expected to represent 50% of the US workforce in 2021. What does this mean to the ARM industry in 2021? Communication channel options will create the largest area of impact to revenue and profit in 2021, bar none. Text messaging is the most common and accepted form of communication in the US, especially amongst Millennials. The CFPB rules provides a limited safe harbor for the text messaging under a specific process but it also does not place specific restrictions that will impede an agencies ability to utilize this communication channel.
In 2021, those agencies that are utilizing text messages to communicate with consumers will see the most significant positive impacts to their business through increased right party contacts, displacing traditional communications via phone as the most significant communication channel. In 2020, the pandemic was not a choice, it forced us to pivot. In 2021, communication preference is not a choice, it will force us to pivot. Those agencies that pivot early are most likely to experience significant positive impacts to their business in 2021, while those that wait for others to pave the way – well they will wait – if they survive.
Rick Bonitzer, Credit Collection Partners
2021 will be perhaps the most challenging year business executives will ever have when crafting their company’ budget. For starters, the feds are looking to provide another round of COVID relief. This will likely coincide with the front-end of our tax refund season. Q1 & Q2 may be the most profitable quarters businesses will have ever realized. We also cannot discount the PPP forgiveness event that many businesses will realize in 2021 and ACA International’s outstanding lobbying efforts to keep harmful legislation at bay. Cheers to a great 2021!!
Don Maurice, Maurice Wutscher
The challenges presented by the COVID-19 pandemic will continue to test the industry. State and federal efforts to curb consumer debt collection, be it by restricting certain activities or by imposing larger exemptions on income and assets, will continue and could accelerate. Of course, we could see new restrictions on workplace environments. The new stimulus package signed into law by President Trump (the Consolidated Appropriations Act, 2021) also contained provisions that will directly impact consumer bankruptcies that pose challenges for mortgage lenders and their servicers. Because these provisions will make it easier for Chapter 13 debtors to complete their plans, there will be a spike in consumer bankruptcies looking to take advantage of these new provisions. The U.S. Supreme Court will decide Facebook Inc. v. Duguid and a favorable outcome could substantially curtail the scope of the Telephone Consumer Protection Act. New York State will pass legislation reducing the statute of limitations for many consumer credit products from six to three years and I expect other states will follow.
Lauren Valenzuela, Performant
There were many events from 2020 which impact 2021 – where do I begin? For starters, we finally have regulations for debt collection. Operationalizing these new rules before their effective date in 2021 will take much of our industry’s time and resources as we gear up for compliance with the new rules. I also think there are continuing COVID related impacts on consumers, clients, collectors and agencies. COVID was a major disruption for many people in many ways, and continues to be into 2021. This disruption, however, forced many to try new things, such as agencies, clients and state regulators allowing collectors to telework, and accelerating our industry’s exploration and use of technology for multiple purposes. I hope we continue to see innovation into 2021. There were also notable legislative developments, such as California’s new licensing law, as well as significant judicial events, such as a new make-up on the Supreme Court of the United States which will surely have lasting impacts for our industry into 2021 and beyond.
Michael Klutho, Bassford Remele
Year 2021 will be like no other. Countless consumers will find themselves behind on bills through no fault of their own. The Covid pandemic was a sucker punch no one expected or planned for. Job losses, used-up savings as well as potential loss of housing will weigh on U.S. consumers. As such, it will be vitally important for creditors and their collection agents to engage with consumers more than ever in problem-solving ways to help them satisfy their debts. Discounts, payment plans, payment deferrals, etc. will become even more critical collection tools as we work to dig out from the mess that the pandemic will leave behind once it’s over.
Chris Dunkum, First Collection Services
The combination of COVID-19 and a new administration that is likely to beef up regulations in our industry is the game-changing recipe that will impact us the most in 2021. The effect is going to be felt in challenges and new opportunities for growth beyond what we have already dealt with in 2020. Companies will have to quickly adapt with an open mind. We are also going to have to be ready in our industry to deal with the federal and state changes to the rules and laws that regulate how we collect and what we collect. Our technology partners will be racing to catch-up fast because the changes that I am talking about are not even the CFPB changes that have already been announced. The year 2021 will be a new beginning for our industry, and the thing I love most is how we face change head-on, ready to figure it out and be better than we were before.
Garret Angelo, JJ Marshall & Associates
While the CFPB Final Rule will become effective in 2021, the biggest impact on the ARM industry will be the current macro environment. The trends in the broader economy will provide increased opportunities for the ARM industry versus 2020. Creditors will feel increased pressure with their debt on hand rising due to forbearance allowances as a result of COVID-19 . The services and expertise that the ARM industry provides will be in even higher demand than a typical year. At the same time, the national unemployment rate is expected to decline from where we are today which will increase consumers ability to pay their debt. Barring expanded government regulation, I believe the ARM space will fare very well in 2021.
Ray Peloso, Katabat
After years of preparation, 2021 is the year that the ARM industry assertively steps into forward with transforming the ARM business model, driven by three major factors (in order of impact). First, the Covid-related events of 2020 became a “burn the ships” moment for the industry, where participants showed tremendous resiliency under extraordinary circumstances and strategically proved that many long-held operating assumptions could be successfully challenged. It is, oddly, a gift of the Covid crisis. While the industry was methodically albeit slowly embracing technology and change prior to Covid, surviving 2020 proved that the industry can really apply different operating assumptions and see positive impacts. Second, the credit impacts of Covid will accelerate the negative effects of a bifurcated economy and issues like income inequality, placing extraordinary pressure on policy-makers to continue to provide stimulus while the economy heals. So while overall average delinquency rates will be significantly better than earlier predictions, the pain will be concentrated on the subprime end of the spectrum which will be a big challenge for the industry and liquidity of recoveries. Which leads to the third major driver, a new Administration and CFPB Reg F. While not likely a transformational change in policy, there will nonetheless be a more aggressive regulatory posture driving the industry to adopt Reg F.
Larry Parks, Forethought Advisors
The ARM industry grows when interest rates rise and mortgage affordability for working families requires lower initial mortgage rates to allow these families to purchase homes. In a low interest rate environment like we presently have, the industry needs a push by public policy to encourage homeownership for more higher risk families that currently rent. That is; some type of cross subsidy that enables people who could not afford a home at current relatively low interest rates to be able to afford a home. In sum, the ARM industry needs: (1) recovery of the economy and rising interest rates for mortgages or (2) creative uses of CRA lending, Section 8 for homeownership or rent-to-own schemes that create a market for even lower interest rates for more at-risk families to become homeowners. The latter is more likely in a COVID-plagued Biden Administration.