Latest E&Y study shows significantly positive economic impact from the collection agency industry.

Unpaid debt negatively affects all facets of the consumer-driven economy, according to accounting powerhouse Ernst & Young (E&Y). The firm recently teamed up with the Association of Credit and Collections Professionals (ACA) to release a study on The Impact of Third-Party Debt Collection on the U.S. National and State Economies in 2016.” Together they determined how third-party collection agencies benefit the economy by recovering delinquent accounts. They determined:

By recovering tens of billions of dollars in delinquent consumer debt each year that may otherwise go uncollected, the third-party debt collection industry generates important benefits to the U.S. economy.

This article looks at the numbers released by E&Y on the economic benefit of collection agencies in the U.S. These organizations recovered $78.5 billion in 2016 cementing their positive economic impact on business and the overall economy. Collection agencies like Rocket Receivables help business owners and the economy by providing this important service.

E&Y and the Collection Agency Industry

The study surveyed debt collection agencies and reviewed payroll, employee, and business data from the U.S. Census Bureau. What they found validated the value that a collection agency can bring to any business. Unrecovered accounts receivables place a significant strain on the American economy, negatively affecting consumer pricing for goods and services, driving up the cost of borrowing, and undercutting the bottom line in every business category.

Debt collection improves inflation by reducing prices for goods and services while decreasing the risk of business insolvency for companies that improve their debt recovery processes. The study found that of the $78.5 billion in debt collected in 2016, with the collection agency fees removed, third-party debt collection agencies returned $67.6 billion back to their clients. The direct impact on accounts receivables for any size business is profoundly positive.  

Third-party debt collection infuses a significant amount of cash back into the American economy.

The study also pointed out that, of the revenues collected in 2016, 29% of the debt collected was less than 90 days past due. However, the collection agency industry recovered 71% of the debt that was over 90 days past due. This is a startling number that illustrates the real value of a collection agency in capturing significantly aged past due accounts. For industries like healthcare, which has carved out the top debt category, this is particularly important. 

The study showed that the American collection agency industry is making a significant positive impact on behalf of their clients on collection past due A/R from the other leading debt categories. This includes industry debts from healthcare to student loans, credit cards, retail, utility, mortgage, and government-related debt.

With these numbers in hand, it seems clear that third-party debt collection firms provide real ROI that benefits their clients. In addition to the positive impact on the economy, and the corporate bottom line, the collection agency industry employs more than 218,000, with a payroll of more than $12 billion annually. This adds to the economic benefit of firms that recover past due A/R.

Rocket Receivables is standing by to illustrate this value to your company. Trequest info on how we can help your business, contact us today.