As 2022 nears its end, we sat down with ARM industry experts and asked them to share their predictions for 2023. Where do they see the industry going? In a climate that will undoubtedly be characterized by changes, how can ARM businesses prepare to best position themselves in this evolving market?
The economy: “When is that point of no-return?”
One of the main topics surfacing in our conversation with industry experts was the macro-economic environment and strong concerns about the implications of the rising level of household debt for the ARM industry in 2023. “Savings rates are at an all-time low, with credit debt at an all-time high. Something has to give here, but unemployment rates are at an all-time low,” commented Tim Collins, Chief Compliance Officer at InDebted. “The consumer could continue to service their outstanding debt, assuming they do not take on too much debt that tips them past the point of no return for the foreseeable future. It is at some point this breaks, the real question is when?”
Many of our conversation partners also voiced concern about how to cope with debt that is increasingly difficult to collect with restrained internal resources and low margins on inventories.
Regulation: “Training and monitoring of consumer-facing employees will be critical”
Looking back on the policy statements made by the CFPB in 2022, Joann Needleman, Partner and Leader of Clark Hill’s Consumer Financial Services Regulatory & Compliance Group, estimates that “the CFPB’s rulemaking work for debt collection is done. The ‘fun’ part begins with enforcement and supervision and that is where 2023 may be brutal. [...] For those in the ARM industry who collect and report medical debt, intense scrutiny will continue into 2023.” Her advice to collectors is the following: “Training and monitoring of consumer-facing employees will be critical to ensure that an organization is compliant and not engaging in any sort of discrimination or unfair treatment. Technology will support and help the credit and collections industry meet these new and demanding obligations with ease and efficiency, in order to produce the outcomes a regulator wants to see.”
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Workforce management: “Where are the people?”
Besides the economic and regulatory volatility, the other major industry challenge is of an internal nature, namely employee recruitment and retention. Debra Ciskey, Executive Vice President at CACi, shares actionable recommendations on how to proactively address the staffing challenges and stop the “free falling” in 2023:
“The ARM industry is on the edge of a precipice, and I believe we will need to make proactive changes in 2023 that will pull us back from free falling into an unrecoverable situation. Everyone I speak with asks the same question: ‘Where are the people?’ Our challenge going forward is to position our industry and our companies as desirable places to work. As little as consumers want to hear from us, job seekers want to speak with us even less. There are technological options that can assist with serving consumers to some degree, but we will always need people. In 2023 we must be more prominent in our communities by participating in, and even creating for ourselves, opportunities to display acceptance of and support for people from diverse backgrounds. We must implement diversity, equity and inclusion in our workplaces, and get the word out that we have changed. The first place to look is our employee policy manuals. What doesn’t work for today’s workforce—get rid of policies not required by law. What’s missing that the new workforce is looking for? Ask your newest employees for feedback—what would make our workplace desirable for their friends and acquaintances? Plan events that will spark interest in your company and get people to actually show up for interviews. In this post-pandemic world, getting people to crawl out of their comfortable cocoons may be difficult, but it can be done!”
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In a similar vein, Carla Polito, Senior Director of Litigations Performance at Resurgent Capital, predicts that working from home is here to stay in 2023 and shares her best practices on how to optimize the performance of a hybrid workforce: “In the last few years, the buzz of the call centers faded away. Now that many people still have the opportunity to continue to work from home, performance directors need to pivot their focus. We have increased reviews and audits. Now we need to ensure that the training is effective in this new environment. The move is from hours in a classroom setting to immediate, personalized micro-learning units that enforce corrective behaviors.”
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Digitization: “Do you have the tech it takes?”
Digitization has been a buzzword across economic sectors for some years, yet tech adoption in the ARM industry has been slightly slower. A large part of the collection work is still done via phone calls. Joann Needleman from Clark Hill observes: “While many participants and larger clients are still shy to adopt these omni channels, consumers’ demand for these types of technologies will give creditors and clients little choice but to put these tools into place.”
While the adoption of new tech might not always been easy and frictionless, Michael Lamm, Co-Founder and Managing Partner at Corporate Advisory Solutions, sees big potential in new technologies that help ARM businesses boost performance and gain a competitive edge in a landscape characterized by consolidation: “The digital collections movement continues to be in full steam, and we are excited to see all of the new technologies that are coming into the ARM industry to help drive enhanced collection performance in a compliant manner. We anticipate additional M&A consolidation globally in the ARM industry, as more digital ARM companies look to accelerate market entry and obtain blue-chip clients and deploy digital-first solutions.”
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Dave Hanrahan, CEO and Co-founder of Kredit, points at new payment modalities where adopting new tech can help agencies not only to get ahead of regulatory requirements, but boost their business and bottom lines: "Digitization will continue in 2023 and be critically accelerated by the CFPB’s new attention on Dodd-Frank Act Section 1033 rulemaking. Depending on how the CFPB defines ‘covered financial institutions,’ recovery organizations may be required to furnish consumers’ account data through whichever third-party technology platform a consumer wants to access information on their behalf. Those consumer-selected platforms will likely be different from organizations’ traditional payment portals. Organizations should start preparing their technology and operations for that contingency now. The shift will result in significantly higher inbound recoveries and benefit organizations who can harness the trend to their benefit."
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Operations: “Data is the new oil”
Digitization means that businesses generate and own an increasing amount of data. This is happening to most ARM businesses that use digital systems to manage their collection operations, for example, for call monitoring, remediation, archiving, and BI. Tim Collins from InDebted predicts: “Data is the new oil, and extracting data from all sources, especially voice, will be a must-have in 2023. We are in the age of machine learning, and ML runs on data.” However, as long as data is siloed in different systems, the ability to generate actionable insights from it remains limited. Collins advises: “Getting ALL the data and getting it into one place for the ML to do what it can are the key differences between organizations that will make it and those that don't.”
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According to Collins, ARM businesses looking to leverage data consistently in their operations are well-advised to look for all-in-one platforms that cover the entire compliance cycle, from monitoring and archiving through remediation, training and reporting. Nir Laznik, CEO at Sedric, points out the value of elevated reporting capabilities, enabling agencies to create trusted relationships with creditors and secure more business. He added that “AI-based compliance management can ease the burden on all parties by automating reporting and reducing risk and compliance management costs.”
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“Training and monitoring of consumer-facing employees will be critical to ensure that an organization is compliant. Technology will support and help the credit and collections industry meet demanding obligations with ease and efficiency, in order to produce the outcomes a regulator wants to see.”
Consumer Financial Services Regulatory & Compliance Group
Clark Hill
“Our challenge going forward is to position our industry and our companies as desirable places to work. We must implement diversity, equity and inclusion in our workplaces, and get the word out that we have changed. Ask your newest employees for feedback—what would make our workplace desirable for their friends and acquaintances? In this post-pandemic world, getting people to crawl out of their comfortable cocoons may be difficult, but it can be done!”
CACi
“In the last few years, the buzz of the call centers faded away. Now that many people still have the opportunity to continue to work from home, performance directors need to pivot their focus. We need to ensure that the training is effective in this new environment. The move is from hours in a classroom setting to immediate, personalized micro-learning units that enforce the corrective behaviors.”
Resurgent Capital
“The digital collections movement continues to be in full steam and we are excited to see all of the new technologies that are coming into the ARM industry to help drive enhanced collection performance in a compliant manner. We anticipate additional M&A consolidation globally in the ARM industry, as more digital ARM companies look to accelerate market entry and obtain blue-chip clients and deploy digital-first solutions.”
“Digitization will be critically accelerated in 2023. Recovery organizations may be required to furnish consumers’ account data through consumer-selected platforms that will likely be different from organizations’ traditional payment portals. Organizations should start preparing their technology and operations for that contingency now to harness the trend to their benefit.”
Kredit
“Data is the new oil, and extracting data from all sources, especially voice, will be a must-have in 2023. We are in the age of machine learning, and ML runs on data. Getting ALL the data and getting it into one place for the ML to do what it can are the key differences between organizations that will make it and those that don't.”
Indebted
“In 2023, collectors and creditors will be required to work closer together. Reg F oversight requirements have created a new reality of shared compliance responsibility. Servicers and creditors can better collaborate by using new data-driven compliance platforms that provide all parties with critical insights and generate the transparency and trust needed to succeed in a tightening regulatory climate.”
As Gen Z enters the workforce, you’ll have up to four generations in your agency. Everyone learns differently. Young people learn from TikTok videos, and there is a professional term for this: micro-learning. Such short videos are especially efficient when sent out close to the time when the violation occurred.
Barron & Newburger
The most efficient training systems I’ve seen are those which build surgical, data-driven compliance content and provide agents the exact training they need when they most need it. This approach avoids wasting time and money on training which does not address the need. Continuous, role-based training programs that focus on the needs of each individual agent are some of the most efficient and effective I’ve seen.
Bedard Law Group
“Training is only going to be effective if it's done at or near the time the violation occurred. As agents handle hundreds of calls a week they will not have the capacity to remember particular moments of each consumer interaction. Therefore, effective monitoring will be critical to address the deficiency when it happens, in order to remediate quickly so that it does not become a systemic problem going forward.”
Consumer Financial Services Regulatory & Compliance Group
Clark Hill
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