News & Notes from IACC


Collection Industry Cautiously Navigates Its Way Through The Storm

Written by David Schmidt

The impact of the Covid-19 pandemic on people, businesses and the economy is unprecedented. During a typical economic downturn, collection agencies and attorneys are used to helping their clients weather the storm, but seemingly from a safe distance. Because of the widespread disruptions caused by Covid-19, the collections industry has been forced to batten down the hatches and ride out the storm without the benefit of a safe harbor.

Bill Peterson has been a creditor’s rights and collection attorney with Miller Cohen Peterson Young, P.C. for over 20 years. He observes, “Even the crashing of a market has not displayed the impact to day-to-day business in the way the events of the last few months have.” Keep in mind those comments come from the perspective of a law firm that has been able to physically keep their doors open, albeit with more work being handled remotely, serving states (Colorado and Wyoming) that did not completely close down.

For Brad Lohner, CEO of PCM Corp. and incoming President of the IACC, the impact has been even greater.  “We haven't had business from some of our clients now for three months…it’s like they're still on hold,” he states.

PCM Corp. claims to be Canada’s only nationwide credit, collections and lien filing agency, and as such is also impacted by what is going on below the 49th parallel.  According to Lohner, “My American colleagues are getting more claims in than they've probably ever had, so it hasn't impacted them as much.  Whereas, in the Canadian market space, a lot of our clients just stopped placing claims because they were concerned about their public image and things like that.”

Tony Terry, current IACC President and President of CRF Solutions, backs up Lohner’s observations about the American scene.  “In terms of placement from clients, it's dipped a little bit, maybe 10-15 percent,” he says in reference to March and April. Subsequently May improved somewhat and Terry claims CRF Solutions had a really good month in June.

The biggest issue for both agencies has been dealing with businesses that closed. “We had to pause our efforts on those accounts, not knowing whether the business would re-open or not. As time has gone on, some of those businesses have just gone ahead and closed permanently while some have been able to re-open. We're just now getting to the point of making re-contact,” explains Terry.

He continues, “I'm pleased with where we are and where we're headed. All of our clients are still in business. We haven't had any fall off that way, though some of them have made decisions to hold off on placing claims because they're working with their customers.”

In contrast, Lohner’s PCM Corp., which does both consumer and commercial collections, has seen some clients in the retail space calling it quits. He also notes there have been some consumer collection agency failures resulting from the loss of large retail clients. That situation has been aggravated by Covid-19 regulations that prevented anybody proceeding with collection activities against consumers.

Like everybody else, the industries they serve and the regions in which they operate have affected collection organizations during the Covid-19 crisis. The key to success in this fractured environment is to find an operating model that works for your company while also being able to deliver added value to your customers.

Review Your Business Model

One common denominator expressed by collection industry leaders is their willingness to reassess their business models. A physical, office-based, centralized organization is, at least for the time being, not an option. Accepting that fact compels a willingness to find other ways to accomplish your core mission.

“First, we tried to ascertain the immediate impact of things to our commercial activity. In other words, how are revenue sources impacted? How are expenses impacted? What can you capture immediately and what will it take you a little bit of time to capture?” explained attorney Peterson. “Once you're able to figure out your cash flow and expenses, you work inside of those parameters to both be more effective and also look for opportunities.”

Table 1:  Guidelines for Pivoting in a Crisis

Take a hard look at your business fundamentals


  • What absolutely must be done (regulatory compliance)
  • What needs to be done (to adapt to the situation)
  • What else do you want to do (to drive improvement)

Embrace Digital Transformation

  • Enable Fully Functional Home Offices – Computers, Webcams, Printers, Routers, Firewalls, Phones, Scanners, etc.
  • Participate in Virtual Meetings with Customers, Staff, Debtors, Attorneys, etc.
  • Facilitate Electronic Documents and Automated Workflow
  • Update Policies & Procedures

Accommodate the physical aspects of the business that must continue

  • Mail Handling
  • Onboarding/Training New Employees
  • Human Resource issues
  • Office Policies / Use

Explore New Opportunities

  • Expand Advisory Services
  • Look to Enhance Customer Relationships
  • Cost Savings and Performance Enhancements

Be Patient

  • There is no need to rush to conclusions while the situation is evolving
  • And remember, Rome wasn’t built in a day

Lohner and his management team took a similar approach.  They even went so far as to outline a 5-stage survival plan tied to revenue objectives. Salary reductions and other cost saving measures were tied to each tier that progressed from a modest impact down to a worst-case scenario. Lohner and his other executives were first in line for cutbacks. “Because we have this great staff and I don't want to lose these folks, I'm taking the biggest hit first,” he shared. As it turned out, “March was not bad, April was okay and then May was terrible.” So, Lohner felt the impact as PCM moved, as it turns out, only partially to stage 1. Fortunately, June improved, so no further steps have been necessary.

In contrast to the restrictions Peterson and Lohner faced, CRF Solutions was confronted with California completely shutting down. “When we were ordered to shelter in place and had to close our office, we moved all of our staff, both on the collection side and on the construction notice side, into their homes. We got them all set up remotely, which was a considerable undertaking, but we got it done within a couple of days and everybody has been operating from home since then,” Terry relates.

Find Ways to Create Value

When the normal ways of doing things are disrupted, new opportunities are invariably created. That has certainly been the case for the collections industry as a result of the disruptions to the economy and life in general caused by Covid-19. For example, Peterson claims, “during difficult times, we have found creative ways to service our clients that we did not anticipate and that perhaps we wouldn't have discovered had the circumstances been different.”

According to Peterson your objective becomes “trying to figure out a way to use your resources, your time, your effort, and your energy in a way that allows you to be effective that is different from an environment where you're chained to a desk.” He adds, “We've worked hard to try to find available opportunities in the marketplace to provide service and provide advice…to be able to speak to the business conduct of our clients, and be able to help them be as effective as they can, while at the same time dealing with the fact we're an existing business and we're trying to be as effective as we can be for ourselves as well.”

The opportunities come in a variety of forms.  “We found that a lot of business people weren't aware of how to apply for the government’s stimulus programs,” explained Lohner. “We became a facilitator for those programs by teaching business owners how to apply, helping them to pre-qualify themselves and steering them in the right direction. By doing that we got a bunch of good payouts when they got their stimulus checks.”

Taking a similar tack, Peterson relates, “We were able to identify assets that we were able to execute on, relatively efficiently, for our clients’ benefit and were thus able to provide additional income streams for our clients during a difficult time. It's one of the things that we were probably most proud of…how we were able to supplement our clients when they needed it most.”

Lohner is also taking advantage of the current disruption to be on the lookout for good quality acquisitions. “Unfortunate things happen to good people, so I’ll look for opportunities to purchase an operator,” he says. In addition, he’s keeping an eye out for good sales, management and collection talent that has been laid off, but he is also questioning the value of his real estate now that a distributed operating model has shown promise. In any event, “when we come out of this we want to be firing on all cylinders,” he concludes.

Virtual Meetings Have Their Advantages

The move to virtual meetings has been another catalyst for new value.  Lohner discussed the benefits of meeting people via Zoom or Webex, who he would have only phoned in the past, noting that it allowed a peek into the other party’s home or office. “In a lot of cases for us, the customer experience was better. We're all humans. We're all trying to get through this together and the virtual meeting made it a bit more sociable.” Hopefully, that translates into earlier, larger reclamations.

That’s not the only upside to virtual meetings.  Wanda Borges, of the NY law firm Borges & Associates, shared the advantages of virtual meetings in the court process.  She recalls, “I actually had a Zoom court appearance in Texas in a case called Old Time Pottery. There were 43 participants, but it was very organized. Nobody spoke until the court called on them or they raised their hand.”  This use of technology provides a tremendous benefit for attorneys and other participants in that they can be in court for a half-hour session without have to spend several hours of unproductive time travelling to and from the court.

Improving Execution

Despite the current economic upheaval, collection agencies and attorneys, as well as the creditors they serve need to remain focused on performance. The circumstances may be unusual, but getting paid remains the ultimate goal, and everybody is in this together.

Lohner shares that he had a discussion with a senior level credit manager who “was suggesting that now is a really good time for collection companies and creditors to educate themselves about available automation technologies.” There is a benefit to working through your portfolio of accounts both more quickly and more effectively, “not necessarily to reduce head count, but to make people a lot more efficient,” he concludes.

Speed is critical, especially with a deteriorating situation.  Borges agrees with the need to move fast in this environment. “Those clients that are teetering, if you wait the normal six months before you place a claim with a collection attorney or collection agency, they could be gone. So don't sit on them, move them faster,” she affirms.

Persistence also pays dividends. Borges tells the story of a client using a ten-day free demand letter from her office, while continuing to make contact. As a result the client was able to get the attention of the debtor and collect the funds. “The clients are realizing that perhaps the additional one-on-one phone call to the debtor is going to possibly go further today than using a collection agency or law firm,” she observes.

Expect an Uneven Future

While things look better now than they did in April, it’s clear that there is a long road ahead. We are likely seeing only the tip of the iceberg in terms of bankruptcies. That and continued Covid-19 flare-ups will assuredly impact supply chains across industries, but it might not always be where one might expect. For the most part the restaurant industry has been hit hard, but many kitchens offering take-out are doing well. Even so, there is a significant impact on the suppliers and in our highly interconnected economy it hard to anticipate the next shortage or trouble spot.

Peterson explains, “even though I practice in Colorado and Wyoming, I'm impacted by the entire nation. My clients, from places like New York, were not sending files, so naturally from a business perspective I was impacted based on what was going on in New York, California, Florida, and Texas even though Colorado was not as impacted as those areas. We're all dependent on each other.”

In places like NY, courts closed except for emergency filings, child care/abuse issues, and matrimonial cases. In regard to commercial and litigation, you could file a summons and complaint, but getting the index number, which normally took 24 hours, would take two weeks due to Covid. “The NY courts are not back to normal,” claims Borges. “You're looking at months to process a motion. We're probably not going to see judgments entered for another two to three months.”

Meanwhile, the Federal courts, including the bankruptcy system, never closed. “Most of our bankruptcy courts for the last several years have been permitting telephone appearances, but now everybody went to telephone appearances, even the judges aren't necessarily sitting in the courtroom,” notes Borges.

Chapter 11 bankruptcies were up 20 percent in Q1, but many of those were retailers holding distressed debt, not firms impacted by Covid-19.  We will have a better handle on that by the end of Q3, but be prepared for the unexpected. Interestingly, Modell’s Sporting Goods and Nieman Marcus, who both filed before the shutdowns, petitioned the courts to suspend the process because there was no sense in having liquidation sales when nobody could shop. Modell’s finally announced their going out of business sale in early July, so don’t be surprised by unusual delays.

Another concern is the specter of regulation. “The one thing that concerns me as well as others in the industry,” explains Terry, “is what the government is doing to restrict our efforts to collect our client's money. We understand they're trying to protect the funds the government has made available to people that have been hurt by this pandemic. We understand that stuff should be off-limits, but what they're trying to do with some of this legislation is put a complete moratorium on the ability to execute on judgments.”

Lohner is also concerned, but for a different reason. “Legislation is always behind technology, and my fear is they're going to be giving us issues with compliance for having remote staff, security issues, and they're going to want more licensing fees,” he states.

Stay Cautiously Optimistic

Despite all the turmoil and uncertainty, there is reason to hope. “We feel reasonably, cautiously optimistic,” Lohner exclaims, “but one of the things that scares the heck out of me, and I think holds true for the US as well as Canada, is the economic stimulus for small business is going to come to an end at some point.  I'm thinking that's going happen in September or October, at least in the Canadian market space, and that's going to have a major impact.”

“I think that bankruptcy filings will go up and placements will go up and the collectability will go down, but I just don't think it will be as bad as it was [in the Great Recession of 2008] and I don't think it'll last as long,” claims Terry.

Peterson also retains a positive outlook. “I think the economy will continue to develop, not because it will be allowed to, but because it will need to. I'm a firm believer that people drive markets and markets don't drive people. I feel our industry will continue to be creative and industrious in a way that will allow our industry to evolve to service our clients in the best way that we can.” Amen to that.

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