Mike Ginsberg, president & CEO of Kaulkin Ginsberg Company, was joined by debt-buying industry expert Mike Chiodo to discuss market conditions and the factors that contribute to debt-buying success in today’s market.
The accounts receivable management (ARM) industry, and debt-buying segment specifically, was severely impacted by the financial crisis and ensuing regulatory expansion. Now – almost a decade after the Great Recession’s end – is a great time for debt buyers and funding sources to consider entering, returning, or expanding their debt buyer capabilities.
The earliest sign of a promising future for debt buyers is the strong growth of the credit card and auto loan sectors as they relate to bad debt and net charge-offs. Specifically, total credit card and auto loan net charge-offs amounted $39.8 billion in 2018 – 11.0% higher than in 2017. Kaulkin Ginsberg Company estimates that 2019 aggregate net charge-off levels for these two loan types should reach $42.7 billion based on year-to-date data. Beyond these two debt types, there are potential opportunities in healthcare, Federal Government, and financial technology (FinTech) sectors, which should present the ARM industry and debt buyers alike with optimism.
After Mike Ginsberg reviewed today’s marketplace, Mike Chiodo highlighted some best practices in the debt-buying process. For example, Mike Chiodo discussed some major capital sources in today’s market (e.g., joint ventures, private equity, and alternative investment funds) and their distinctions from one another. Furthermore, Mike Chiodo reviewed certain pitfalls that many debt buyers encounter if they are not properly prepared, such as knowing your seller (e.g., are your sellers licensed and insured?) or being unaware of legal processes, leading to wasteful spending and over-payments.
In short, the debt-buying marketplace is poised for growth but still retains certain processes that new entrants or returners must be aware of to operate effectively. Debt levels are growing, and legislators are introducing more regulations that may cloud operational strategies. Navigating through these challenges and remaining informed of timely trends is paramount.
For more information on the debt-buying segment of the ARM industry, such as key client grantor sectors and key process and valuation strategies, watch the below webinar.