Debt collection is a $12-billion industry in the U.S., with roughly 4500 firms working to recover money for clients.
Account Control Technology (ACT) will be setting up shop in the Warren County city of Mason, near Cincinnati, eventually creating 250 jobs.
You might assume that with the recent recession, debt collection would be a booming business. And you'd sort of be correct….
"But the reality is, is that despite the additional volume, you also had Americans who were struggling to pay their basic essentials and many people out of work," says Mark Schiffman, of the Association of Credit and Collection Professionals, based in Minneapolis. He says while there has been an abundance of debt over the past few years, that hasn't necessarily meant a boom for debt collectors. He says between 2005 and 2010, there was a $2-billion drop in commissions made by the industry.
"It's a fee-for-service industry," explains Schiffman. "Debt collectors work on behalf of organizations, like the local hardware store, like Target, or like Verizon…to collect debt that's been delinquent, and they're compensated typically based on a percentage of the amount recovered. So if you're recovering less, you're making less."
A recent study shows that after a strong period of growth, industry receipts for debt collectors dropped by almost 10-percent between 2008 and 2009, the first time that's happened in 20 years.
Schiffman says with signs of an economic recovery, delinquent payments should decrease, and debt collections increase.
Arguably a good thing…right?