Karolyn Rubin, President of ACA

audience during the conference.

The collections industry in the United States is facing a tough challenge due to the mounting debt and delinquency in national credit cards, which has actually surpassed historical levels.

The current market demands more efficient services and at the same time makes room for new job possibilities within Latin America, as was brought forth during the 6th Latin American Congress on Credit and Collections, held a few days ago.
After mortgages, the credit card market is also falling exponentially.

It is estimated that losses by lenders will have exceeded USD $21 billion after the first semester of the year, and may reach another USD $55 million during next year, based on statistics presented during the event.

The current situation is urging banks to obtain a better service from collections agencies. These must challenge the most difficult debtors - while unemployment levels continue to rise - , which requires streamlining, strengthening and updating of their services to keep up with the competition from growing providers.

Tendencies

Luz Torrez, Executive Director of Experian, a leading company in credit report and analysis, stated that "33% of the population has exceeded the 90-day allowance for late payments - regarding the 2009 collection process - which translates to approximately 67 million consumers", 5 million more than registered during 2006.

Even though credit scores in the population at large have remained stable, with a 3% tolerance between 2006 and 2008, collection volumes and outstanding balances have increased considerably. Torrez underlined factors that aggravate the situation, such as certain social and cultural issues the country is facing.

The states of California, Florida and Texas, for example, are not only the most affected by real estate fraud and unemployment, but also by the present financial crisis. Although they are the most populated regions of the country, they have shown increased growth in expenses realized with credit cards, and have a high percentage of retired Hispanics, whose wages or entry condition below average discourages collectors.

Banks have retracted and closed down their credit facilities, even eliminating risky clients from their account databases.
Nonetheless, it remains to be seen how the new Fed-announced USD $600 million loan will be articulated, and just what effect it will have on unfreezing credits and credit cards.

Opportunities

During the congress, different analysts highlighted the opportunities presented for those who provide collection services to third parties within and outside the United States. The industry employs more than 157.5 thousand workers all over the country, according to Karolyn Rubin, president of ACA International.

The latest studies presented by this expert indicate that there are more than 4600 collections agencies to third parties at a national level. These agencies have recouped about USD $57.9 billion in 2007, which represent about USD $17.5 billion in revenues for the industry.

Likewise, Latin American countries have certain service advantages in this sector and are already offering overseas collections through call centers. Central America, Brazil, Argentina, Peru and Chile are some of these countries.

Representatives of the industry in South America, such as Luciano Nicora, President of ASARCOB in Argentina and Oscar Moreno, Manager of RECSA (Argentina, Chile, Peru and Costa Rica) highlighted the qualities that Latin people offer as compared to other countries that are strong competitors in this business, such as India and the Philippines.

Even though they cannot surpass them in employed workforce, regional collections platforms in Latin America have the advantage of being bilingual, keeping in mind that a full third of the U.S. population is Hispanic.

Geographical proximity, cultural similarities, reduced costs due to monetary exchange are some other benefits.

Advantages to third-party collections services in LATAM

A third of the U.S. population speaks Spanish.
A bilingual, fast, and efficient service is offered.
Regional credit platforms in Latin America: geographical proximity and reduced time difference with the USA.
Low rates, favored by monetary exchange rates.
Collections technologies are under development and update.

National credit situation

67 million consumers became delinquent in 2008. Less than 5% are able to obtain new cards after execution and are unable to get new mortgages.
12% get new credit cards after a bankruptcy and 1% open new mortgages.
The total delinquency of middle-class consumers without a mortgage is decreasing.
The total delay of middle-class consumers with an adjustable-rate mortgage (ARM) surpasses that of those who do not have a mortgage.

The markets that were most affected by the mortgage crisis, such as CA and FL, have considerably increased their outstanding credit card balances.
Credit accounts remain stable, but collections volumes and outstanding balances have increased.