Government Collections Look to Rise: Execs

The first half of 2008 marked the continuation of the credit crunch, increasing delinquencies and charge offs and a weakening economy. How does the second half of the year look? InsideARM spoke with several industry executives to get their take on the economy and the receivables business. In this article in the series, we asked several executives at firms specializing in government collections to offer their outlook for the rest of the year.

“Collections slowed somewhat during the first half of 2008, but I expect to see things pick up in the last two quarters of the year as the economy begins to stabilize,” said Mike Vallandingham, partner and chief marketing officer, for Linebarger Goggan Blair & Sampson, LLP, Austin, Tex. “For the foreseeable future I anticipate that our clients will be referring more and more work to us, and as a result (we) will continue to hire new employees and expand operations. Nothing shines a light on the importance of our industry like an economic slowdown or a recession.”

Other company executives agree that a bad economy is generally good for government collections.

“We deal in an industry that has relatively fixed budgets – state and municipal government entities,” said Bruce Cummings, chief marketing officer for Municipal Services Bureau, Austin. “Given the fact that the economy continues to head south, governments have to figure out a way to offset the rising cost of fuel and everything associated with it.

“In addition, all governmental entities are looking for ways to increase their revenue, as the pressure to provide more services to their constituents builds,” Cummings said. “For the second half of 2008, we would expect additional jurisdictions to reach out to professional collection agencies … for assistance with revenue recovery efforts to cover budget shortfalls.”

Small firms also foresee increases in government collection needs in the second half of the year.

“We are seeing an increased interest from government agencies in Montana,” said Jefferey L. Koch, vice president of Collection Bureau Services, Inc., in Missoula, Mont. “Our outlook for the second half of 2008 is for increased placements; in fact we are in the final document exchange process with another major educational institution to begin collection work on student accounts receivables.

“The collection end itself remains problematic, and I don’t see that changing in 2008,” said Koch. “While housing prices are relatively stable in Montana, gas and food prices are certainly depressing consumers’ ability to pay on collection accounts.”