Debt collection market: Stagnant, booming or somewhere in between?

A number of analysts have argued that with recent surges in consumer debt - particularly on student loans - collection agencies have seen a dramatic uptick in demand. But according to recent insight, regulatory pressures and cash-strapped borrowers' simple inability to pay has made conditions particularly difficult. Nonetheless, these challenges don't undermine the fact that debt collection services are important for economic health. As a recent study by the Association of Credit and Collection Professionals points out, the effective and ethical recovery of consumer debts keeps organizations' payroll and cash-flow in line, staving off the threat of layoffs and late payments. Collection also helps keep credit, goods and services available while reducing the need for alternative, potentially risky revenue sources. "The collection of consumer debt provides a valuable benefit to American households, businesses and creditors," the ACA explains in a report. "Based on a net of $44.6 billion recovered, third-party debt collection efforts represents $396 in savings on average per household by keeping the costs of goods and services lower." However, industry employment has fallen in recent years. A report from Ernst & Young shows third-party debt collection agencies employed roughly 148,000 people in the U.S. in 2010 - down from the 155,000 in 2007, according to PriceWaterhouseCoopers. That makes for a 4.5 percent decline in employment in the accounts receivable management industry. Industry earnings have also slumped in recent years, indicating that the debt collection industry has not been exempted from the full force of the global economic downturn. "Responding to declining commission rates and shrinking margins, collection agencies have pulled back on their hiring," explains Patrick Lunsford for Forbes magazine. "There is anecdotal evidence that shows 2011 was a little better on the hiring front, but no data is yet available for last year." Lunsford adds that the impression of a booming industry is the result of readily available public information, which shows continued activity in the sector - but at lower revenues and profit margins. This has forced third-party agencies to cut back on employment, much like other sectors affected by the recession and the resulting plague on the  job market.