Collection firms bank on largest debtor lists

Published online on Sunday, Oct. 18, 2009

In the often murky waters of the debt-collection industry, United Recovery Systems in Houston is considered a "whale hunter."

In its search for clients, United isn't looking for mom-and-pop businesses with a few hundred deadbeat customers. It wants bigger fish.

Its client roster includes national banks, international credit card issuers and domestic and foreign auto finance giants, each of whom count on United to make good on their bad accounts.

In the current economic climate, the "whales" are virtually jumping out of the water and into United's boat. A year ago, the company was reeling in $540 million to $560 million in new delinquent accounts each month. This year, it's $937 million, said United's marketing director, Sean Keegan.

Patrick Lunsford, senior editor at InsideARM.com, which chronicles the accounts receivable industry, said the collections industry growth spurt is fueled by several factors, including falling real estate values that left homeowners unable to pay off their debt by tapping their home equity. In addition, more banks are simply giving up on delinquent accounts and declaring them as charge-offs, or losses.

Debt collectors are also in favor because debt buyers aren't paying what they once did for debt portfolios because there's such a glut right now, Lunsford said.

"This time, the volume was so huge that we had to run out and hire collectors," said United's Keegan. "I can't put 4,000 accounts in this guy's file box for him to work this month. I have to go hire new people."

After beginning the year with 1,200 debt collectors, United has added 300 more and will add another 300 by year's end. That 50% work force growth isn't an aberration.

With bad credit card debt rising, along with foreclosures and job losses, billions of dollars are outstanding on millions of past due accounts, and creditors want their money -- now. Established collection agencies with track records of success are expanding their operations and hiring collectors, managers and support staff to keep up with demand.

"As banks scramble to bring in money, they're going to go with the companies they feel most safe with," Lunsford said. "They're not going to spend a lot of time trying out new collection agencies, so companies with the strongest business relationships are getting the work."

Last month, Windham Professionals announced plans to add 140 employees to its 60-person operation in East Aurora, N.Y.

Premiere Credit of North America just opened a second operations center in Indianapolis and began a $4 million expansion of its headquarters there.

Premiere, which specializes in student loan collections and government debt from traffic tickets to back taxes, bumped its work force from 250 in January to 361 in August. It expects to employ more than 500 people in a few years.