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Report gives insight into commercial debt landscape

Dec 16, 2013 Walt Wojciechowski

Debt collection services play a vital role in supporting the nation's economy. Debt relief agencies often help enterprises and lenders collect late payments that allow their clients to recover necessary capital resources to stay in business. Also, many reputable debt collection firms help individuals establish a viable payment strategy that helps them eliminate debt, which can boost their consumer credit reports.

Although these types of services are generally seen as the primary tasks for most debt recovery groups, these organizations are also active in the B2B sector. Making sure that all outstanding accounts are addressed in a comprehensive fashion is important for many companies.

According to a recent insideARM article, data from the Commercial Collection Agency Association (CCAA) indicated that the number of commercial accounts in collection increased this quarter. The source reported that number of commercial accounts given to CCAA members this quarter spiked 14.49 percent from the previous quarter. However, the overall dollar amount dropped 1.7 percent during that period. That could indicate that although more accounts are in default, commercial borrowers are keeping up with their payments for longer periods.

Long term numbers
Year-to-year numbers showed a much different trend. Compared to reports released last September, the number of CCAA accounts has decreased 32 percent, and the monetary value of those debts has declined 27 percent, according to the source. Both of these trends should spread optimism among corporate lenders, as it shows more businesses are staying current on loan payments.

Data from the CCAA provides a relatively accurate picture of the national commercial collection landscape. InsideARM noted that about 65 percent of all commercial debt accounts in the United States are handled by CCAA members.

Whether or not these trends will continue is yet to be seen. Although many lenders are optimistic about the current direction of the economy, one debt collection expert warned that defaults may increase down the line as mortgage activity grows at an accelerated rate.

"Such aggressive activity often leads to excessive debt, as these transactions remain significant obligations." said John Monderine, CEO of Rapid Recovery Solution. "Consumer and commercial debt collection agencies are deeply connected to the fluctuations in mortgage rates."

For this reason, both commercial lenders and debt collectors should keep an eye on trends within the lending and real estate markets to determine what the future holds.