Opinions are a lot like a certain part of the body, the old saying goes … everybody has one. But when you ask a group of experts to share their opinions on what 2023 holds for the accounts receivable management industry, what you get is a frame that will wrap itself around the menagerie of events and trends that will cause people to look back a year from now and be grateful — either because it was a good year, or because 2023 is over.
Rozanne Andersen, Finvi
In the wake of Regulation F, most industry experts predicted 2022 would be marked by unprecedented numbers of Fair Debt Collection Practices Act (FDCPA) lawsuits. Few, if any, predicted FDCPA lawsuits would decrease in 2022. Yet that is precisely what happened – in Federal court. In contrast to years of FDCPA lawsuits teetering at nearly 10,000 annually, 2022 barely passed 4000 FDCPA Federal court filings.
Unfortunately, this does not mean litigation against the industry decreased. Rather it means FDCPA litigation found a new home – state court. I predict the trend to litigate FDCPA and Regulation F lawsuits will continue to play out in state courts. State court decisions are not published, are difficult if not practically impossible to track and are as disparate and unique as the judges that decide them.
Take Away: Recognize consumers have not suddenly decided to stop suing debt collectors. Nor have consumer attorneys moved on to different litigation targets. Remain vigilant. Continue to invest in your compliance management system and take compliance with the FDCPA and Regulation F very, very seriously.
Joann Needleman, Clark Hill
2023 will be the year when the CFPB’s rhetoric and initiatives will turn into action. The CFPB’s theme for 2022 was “unfairness” and they will utilize their new and old tools in their arsenal to negatively portray the financial services industry, especially the ARM industry, in that light. The revised UDAAP manual will be the play book. Study it, learn it and live it because as the CFPB goes about its examinations the shield of confidentiality will be gone. Remember that back in April, the CFPB issued a proposed rule to invoke their “dormant” authority to supervise any non-bank if it posed a risk to consumers. That risk determination was never previously made public. However, the rule was finalized in November, now the risk determination will be made public by default; confidentiality is now the exception to the rule. Seeking unfairness where ever it may be and however it may be perceived will be the CFPB’s mantra in the coming year. Whether it be credit reporting, debt collection, underwriting or data security, looking at it through the lense of unfairness will be the CFPB’s priority. Failure to address unfairness, regardless of how unattainable it may be, is not an option. My advise to my industry friends is to not fail into the trap of complacency or you will otherwise find yourself on the “naughty list”. Happy New Year to All.
Michael Lamm, Corporate Advisory Solutions
As I reflect on 2022 and look ahead to 2023, I can’t help to think about how much has changed – Covid-19 seems to be now in the rear view mirror but we are now experiencing the post-Covid-19 economic bubble beginning to deflate. I believe that our country will enter a recession in 2023 but it will not look like what we experienced in 2008. With rising interest rates, a slow-down in consumer spending and inflationary pressures seen from everything from gas to food prices, our economy will certainly face additional set backs in 2023, but I don’t think we need to go into panic mode just yet.
The ARM industry certainly faced challenges in 2022 – lower liquidations, placement volume shortages, implementing Reg. F and a challenging labor environment, but the industry continues to be resilient and will find ways to survive and thrive. I believe the companies that fully immerse themselves in technology/data/analytics will end up doing well thru a downturn.
Global M&A activity will be down in 2023 but remember it is coming off historic highs during Covid-19 – I do expect a robust year of dealmaking in the ARM industry, driven by strategic/industry buyers as well as those that are tech-focused internationally and are looking to expand via acquisition. I would also anticipate a few new entrants to the industry whether it is thru private equity or a family office looking to deploy capital in the space. Expect to see a significant increase in debt sales in 2023 which should help to normalize the pricing market.
I am hoping, like all of you are, for a strong tax season! Happy New Year and all the best in 2023! I hope to see many of you at ARMTech in January – it is shaping up to be a great first conference of the year!
Leslie Bender, Eversheds Sutherland
From a privacy and data security perspective I predict that the states will continue to explore ways to regulate algorithm-fueled uses / processing / collection of consumer data while at the same time urging industry to develop meaningful data retention and destruction programs to reduce the potential for data security incidents. Along these lines I predict California’s Privacy Protection Agency – now with the guiding perspective of new Board member Alistair Mactaggart – will draw national attention on the collection and use of consumer data when it takes a deep dive into artificial intelligence / dark patterns and commercial surveillance in the Agency’s next round of proposed CPRA related regulations revisions (while continuing to oppose a federal data protection bill). Sadly I do not predict Congress will be able to pass a federal data privacy bill in 2023 despite bicameral / bipartisan support.
On the consumer financial protection front I predict the CFPB and FTC will also continue to deep dive into AI, dark patterns, algorithms and the risk of UDAAP somewhere in the use of these technology tools. The National Consumer Law Center will, I predict, continue to wield its formidable influence on state legislatures still concerned about helping consumers recover from the long-COVID effects of the pandemic on the economy.
On the industry perspective, I predict that the 2023 innovation of ARM Tech will be a huge success because, hopefully if you are reading this, you are planning to join us in Nashville in January for this event. Wishing all a safe, healthy, and wonderful 2023!
Aaron Reiter, InterProse
When I joined InterProse in 2017, it was relayed to me by customers that the ARM industry is largely insulated from economic fluctuations – when the economy is good, placements go down but consumers resolve accounts at higher rates while a bad economy results in the inverse situation and revenues are historically pretty consistent.
I know recent regulations or policies have impacted certain debt types, and restrictions are historically unique for many agencies, but based on the latest TransUnion survey data report, the industry seems optimistic about its stability.
Anecdotally, the number of established agencies and startups contacting us to investigate software modernization has not only remained steady but has increased in the second half of the year. We were worried the industry would hunker down in response to media speculation about a recession, but this indicates to us that the industry is investing in itself to keep up with consumer preferences and regulatory constraints, not consolidating at a rate that will result in as drastic a drop of agency numbers as feared, and competition remains healthy.
I’m bullish on the industry, if that isn’t clear. I think it will weather this season of regulatory additions and all that will serve to do is paint brighter lines for industry best practices and reduce the number of openings for lawsuits.
Mark Ravanesi, TrueAccord
In 2023 we expect to see a continuation of consolidation throughout the industry. The solo channel players who focus exclusively outbound calling will continue to feel the pressure from Reg F and the rise in inflation depressing liquidation rates. This will create an environment where we will see consolidation of these companies with agencies who have digital channels.
Omni channel will no longer be a nice to have, it will become table stakes in 2023. As well, we expect to see some liquidation challenges when the GLBA rules go into effect as collectors identify compliant and intuitive approaches to increase engagement.