How Have Debt Collectors Fared in Past Recessions?

The U.S. economy has almost certainly plunged into recession due to the COVID-19 pandemic. Even as states begin to reopen, consumer demand is frozen and supply chains are disrupted. Businesses in every industry, including accounts receivable management (ARM), continue to face significant obstructions to normal operation. Unemployment has soared, as discussed in a previous blog. Though it will take time to understand the full depth of the recession we find ourselves in, there is no doubt that what was the longest economic expansion ever recorded has ended. How have debt collectors fared in past recessions?

To help determine how the ARM industry may be impacted by the current recession, Kaulkin Ginsberg examined the industry’s performance during prior recessions for which we have data: specifically, the Dotcom crash in 2001 and the Great Recession of 2008. Though every recession has its own unique circumstances, studying those past cases could enlighten us as to how the ARM industry will respond to the present situation.

Typical recessions present the ARM industry with mixed results. On the one hand, consumers default on their debts more readily since they lose their jobs and maintain lower incomes. On the other hand, however, a respective decline in expenditures and more conservative spending propensities may offset this delinquency rate increase. For example, if many people lose their job, they may be unable to repay their existing debt balances, leading to defaults and increased opportunities for the ARM industry. Alternatively, they may also focus more heavily on repaying their existing debts and limit their current spending, reducing collection opportunities in the future for the ARM industry. In addition, creditors may choose to limit placements with collection agencies in order to lessen the burden faced by consumers and avoid the negative publicity of pursuing recoveries during hard times. This clearly puts the ARM industry in a quagmire.

The graph below presents Kaulkin Ginsberg’s estimate of ARM industry revenue from 2000 to 2018, based on the most recently released data available. The years in which a recession occurred are highlighted in gray.

Source: Kaulkin Ginsberg, Census Bureau, Federal Trade Commission, Nation Bureau of Economic Research & Various Annual Reports

From this data, we can observe two different scenarios playing out. During the Dotcom crash, ARM industry revenue actually rose, from $8.2 billion in 2000 to $9.3 billion in 2001. In the immediate aftermath – specifically, from 2002 to 2005 – the industry continued expanding at a rapid pace of about 14.2% on average annually. In this scenario, ARM companies most likely benefitted from heightened levels of bad debt and creditors deciding to either maintain or increase their placement volumes, while consumers retained (for the most part) their ability to at least partially pay back their delinquent loans.

During the Great Recession, on the other hand, the ARM industry contracted, with revenue falling by 14.4% from $16.3 billion in 2007 to $13.9 billion in 2009. Despite soaring delinquency rates and record bad debt levels, ARM companies began struggling to collect from consumers who increasingly found themselves unable to pay due to severe financial stress. In addition, collectors that relied on financial services clients saw account placements dry up as financial lenders either went out of business or vastly scaled back their operations. In many ways, these circumstances mirror those faced by the industry during the current pandemic, with many locked-down consumers standing on precarious financial footing and some creditors reducing placements.

Though 2008 and 2009 were challenging for debt collection, the ARM industry rebounded strongly in the years following. Immediately following the official “end” of the recession (as defined by the National Bureau of Economic Research) industry revenue increased by 3.7% to $14.6 billion in 2010. Over the following four years, the industry grew at an average annual rate of 4.16% to $17.0 billion in 2014. This demonstrates the ARM industry’s resiliency in the face of severe economic conditions

The intensity of the COVID-19 pandemic’s impact on the economy suggests the ARM industry currently faces a scenario more similar to the Great Recession than the Dotcom bubble. Experts are anticipating a significant economic slowdown; for example, the International Monetary Fund expects global economic output to recede by roughly 3% in 2020. For the U.S. specifically, Goldman Sachs predicts an 11% decline from a year ago in gross domestic product (GDP) for the second quarter of 2020. Of course, ARM firms will not emerge from this crisis unscathed; many will see significant short-term revenue shortfalls, and others may be forced to close their doors entirely. However, the industry’s bounce back following the Great Recession indicates that ARM companies will survive and adapt, and may even be stronger for it. This too shall pass.

At Kaulkin Ginsberg, we strongly believe the ARM industry will continue flourishing in the long run. We produced a short report that details the early history of debt collection, the birth of the modern industry, and how the industry is constantly evolving even when challenges arise. To request your copy, free of any charge, contact us at

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