Today’s Discussion Topics
Client Changes and Opportunities
Vendor Management Requirements and Technology Advancement
Major Macroeconomic Trends Impacting ARM
CFPB and Regulatory Updates: What to Expect
The Changing M&A Landscape
Disclaimer
This information is not intended as legal or business advice and may not be used as such. Legal and business advice must be tailored to the specific circumstances of each case. Every effort has been made to assure this information is up-to-date as of the date of this presentation. It is not intended to be a full and exhaustive explanation of the law in any area, nor may you use the information to replace the advice of your own legal counsel.
The presenters, Kaulkin Ginsberg and Ontario Systems assume no liability for
typographical or other errors contained in the presentation and materials or for changes in the law affecting anything discussed therein.
0 20 40 60 80 100 120 0 200 400 600 800 1000 1200
Student Loans Growing with Increased
Collection Demand ($ Billion)
total student loan 90+ bad debt
600 650 700 750 800 850 900 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Hospital Total Revenue and Revenue Per Physician
Visits
Revenue Revenue Per Physician Visit
Top 5 States with Highest Bad Debt Top 5 States with Highest Delinquency Rate
California
Florida
Ohio
Nevada
New Jersey
New York
Illinois
New Jersey
0 2 4 6 8 10 12 14 16
Financial Services
90+ Days Delinquent by Loan Type
Mortgage HELOC Auto Credit Card Student Loan All
Vendor Management Requirements and Technology
Advancement
Vendor Management
CFPB’s new found focus on service providers and vendors
CFPB Bulletin, April 12, 2013
CFPB expects banks and nonbanks to have an effective process for managing the risks of service provider relationships
Service provider defined:
• Any person that provides a material service to a covered person in connection with the offering or provision by such covered person of an consumer financial product or service
Duties:
• Conduct due diligence to ensure compliance with consumer protection laws
• Review policies and procedures and training
• Include consumer protection expectations in contract
• Establish internal controls and monitoring
Technology Advancements
Technology will become an integrated part of your Compliance Management system
• Compliance Management System software application
• Complaint Tracker CL [Complaint solution]
• Manual Device [TCPA compliance]
• Validity [TCPA compliance]
• Speech analytics [FDCPA compliance]
• Fused solutions [State and federal requirements]
• Call recording [Creditor and CFPB compliance]
-20 -15 -10 -5 0 5 10 15 20 0 2 4 6 8 10 12 14 16 18 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Aggregate Household Debt
Household Debt % Change © Kaulkin Ginsberg Company
Unemployment Rate
6.8 7 7.2 7.4 7.6 7.8 8 8.2 8.4U3
© Kaulkin Ginsberg Company
13 13.2 13.4 13.6 13.8 14 14.2 14.4 14.6 14.8 15
U6
The New Sheriff
CFPB - the new chief regulator of the
collection industry
FTC – the Quiet Giant
Business through the eyes of the
consumer
The CFPB examination process
•
Areas of focus
•
Field observations
•
Impact on operations
Hot Topics
TCPA – manual dial, consent per credit transaction, right number – wrong consumer
Electronic Funds Transfers (EFTs) – authorization requirements for credit card, ACH debit transactions and E-checks
Call recording – the $5000K phone call
Email and text messages – unique consent requirements
Disputes, inquiries and complaints
FCRA takes center stage
Debt collector discretion – the need for written guidelines
Collector compensation and the new definition of the successful collector
NCO Group Inc., 9.24% Encore Capital Group, 6.40% Following 3-5 firms, 15.37%
Other small and mid-size firms,
68.99%
ARM Industry Market Share in 2013
(Estimated)
*The 2013 revenue data is estimated based on the historical revenue and its growth rate.
0 2 4 6 8 10 12 14 16 18 20
1st 6 Mo. 2011 2nd 6 Mo. 2011 1st 6 Mo. 2012 2nd 6 Mo. 2012 1st 6 Mo. 2013
ARM Deal Volume
Size of Acquired Company ($ Revenues)
Multiples/Structure Small* (< $5M) Mid-Sized** ($5-$10M) Large** ($10-$25M) Platform** ($20M+)Multiples 2-4X SDE 3-6X Adj. EBITDA 5-7X Adj. EBITDA 5-8X Adj. EBITDA Structure 0%-100% cash 25%-100% cash 50%-100% cash 50%-100% cash *SDE = Seller’s Discretionary Earnings (Seller compensation + expenses combined with EBITDA
**Adj. EBITDA (Earnings Before Interest, Taxes, Depreciation + Amortization adjusted for non-recurring expenses that would not exist post-transaction