Whatever you thought you knew about the collections cycle—throw it out. Long observed trends have been disrupted, and the industry is still trying to adjust its expectations. After 2 years of the pandemic, the only thing that is certain is uncertainty.
Typically, when consumers get their tax refunds, they have used a portion to pay down debts. For this reason, pre-pandemic February and March were very lucrative months. Enter the great disrupter, COVID-19. It’s no secret that individuals were struggling with personal finances during the height of the pandemic. Relief packages helped countless families, but the government aid has further implications.
Through the 2021 calendar year, under the American Rescue Plan, parameters were made looser so that the program could better provide for those struggling. The upper age bracket to have a child qualify for the Child Tax Credit, went from 16 to 17. Additionally, the credit increased for ages 17 and under from 2,000 to 3,000 dollars and for those under 6 it increased from 2,000 to 3,600 dollars. In short, this meant more funds for those who qualified. Another change was that from July through December of 2021, half of the credit that would normally have been paid during tax season was paid early to those that qualified in the form of monthly installments during those aforementioned months. The early payout likely means a lower payout during tax season.
Experts across the board have stated that people may need to adjust their expectations. The number anticipated may not be the number individuals receive. Those who expected higher returns may struggle.
In addition to the Child Tax Credit, those who accepted the offer to pause student loans will see a dip in their returns, as they cannot write-off any student loan interest.
Due to these factors, it is likely that the industry may face lower liquidation rates for months that were previously successful. But MRS has never shied away from a challenge.
Co-CEO Jeff Freedman said, “Lower liquidation is a reality that we will have to deal with. Stimulus money in 2020 and part of 2021 that had an enormous positive impact is actually hurting the industry now as a result of much lower placement volumes.”
The past few years certainly haven’t been easy. The pandemic and Reg F have both had astronomical impacts on the industry.
What is necessary in times like these is unwavering customer care and propulsive innovation. Though we cannot change the volume, we can stay true to our values despite the obstacles.
“Our use of our digital tools can help us manage expenses a little better but the tools obviously cannot help us with lower placement volume and placements are like the fuel that fires the proverbial engine in our industry,” said Freedman.
The question circling everyones’ minds is when will volume increase? Though it is yet to be determined, some predict as early as the fourth quarter of 2022. More likely, the industry will experience the volume increase in 2023.
A shift in the way we view the calendar in the industry may be in store, or maybe we’ll gradually return to normal. The fact is that no one knows at this point. Regardless of what lies ahead, MRS’s will forge ahead.