Announcer: Broadcasting live from the Aria Resorts in Las Vegas for the DBA International Conference, it’s Capital Club Radio. Now, here’s your host, Michael Flock.
Michael Flock: Thank you very much. And it’s great to be here in Las Vegas today. I think this is the 19th anniversary of the Debt Buyers’ Association. And we couldn’t be more proud and more pleased and more excited to have five of the past presidents with us here at the Aria in Las Vegas. So on the cusp of the 20th anniversary of DBA International, I can’t imagine anything more exciting and more fun to be here with these five guys. And if I look around the table here, we’ve got Walt Collins, Bob Morris, Mike Cushing, Mike Bendickson, and Rich Monroe. And if you look at how their administration, so to speak, spanned the last 20 years, I think it’s almost a history, an odyssey, of the debt buying industry.
And today, we’re going to talk about kind of lessons they learned, what their accomplishments were, some of the regrets, and some of the challenges they see for our industry going forward. So let me start with Walt who is the second president and founder of a couple of debt buying companies. Walt, could you give our listeners a little background on yourself? And also, what were your biggest accomplishments when you were DBA president? And what were some of your regrets?
Walt Collins: Well, first, thanks for having me here today. I want to first say I was a founding board member of the DBA. I want to give the credit where it’s due, and that would be Dennis Hammond. It was Dennis’s idea. And a few of us got together, agreed. This was back in the day when this was quite a gun slinging industry, fairly new. Our policemen were the Federal Trade Commission. Not a lot of teeth yet. Everyone was trying to get their arms around it, the creditors, et al. Literally, doing business would be like doing business with a bond salesmen that would tell you that these bonds beat Double A.
What would they say? Be Double A or Double A? And so that’s what the Debt Buyers’ Association was founded on to give the creditors, to give our regulators, comfort that there was going to be an association and, of course, all of those affiliated with it that there was some sort of background. That there was business acumen, standardization of terms, all the things that you need in providing good, ethical service and having an ethical industry. One of the interesting things, I was second president. Dennis Hammond and I lobbied the Federal Trade Commission, went to DC. We were in their board room with David Madina, the executive director at the time.
And it was interesting. They were quite interested in what we were doing. We were trying to lobby in respect that we were trying to do all of those things that would give them comfort along with the creditors. I gave them my background. I had every securities license that there is. My career for 25 years before this was an institutional investment banker. We chatted a little bit about that. And they looked at backgrounds. As we were leaving, we were on our feet, David Madina himself said, “Fellows, just a moment.” And he looked at us.
And he said, “Just as you, Collins, were regulated by the NASD,” which today is FINRA, “We want you to regulate yourselves in that manner or, one day, we’ll do it for you.” And I think the day is here.
Michael Flock: Wow. And that was back in 2002?
Walt Collins: No. That was back in ‘98/’99.
Michael Flock: Wow. So, self-regulation was actually initiated then.
Walt Collins: It was highly recommended then. Our industry was far too fractured and fragmented to pull that off. But over the course of time, here we are with the Consumer Financial Protection Bureau. That’s it. At that time, in being the second president, I think it grew so fast. It was so well received so much more than we had earlier anticipated. And I forget. I think as second president, I had 300 or 350 people. And I thought, gosh, I must really be a pretty darn good president. I don’t see this thing growing beyond that.
Mike Flock: So 350, right. Was that your biggest accomplishment then or was it just getting –
Walt Collins: That’s the biggest accomplishment in life.
Michael Flock: Did you have any regrets?
Walt Collins: When I look back, you’re asking for regrets, and that was an era that was so stimulating. It was so much fun. I met so many incredible people. So I can’t find a regret, Mike. I just can’t. It was a wonderful period to be involved. And I was very fortunate.
Michael Flock: So it was ’98 and ’99 then that period?
Walt Collins: Yes.
Michael Flock: And then so following you, here today is, in the sequence of things, Bob Morris. There was someone between you folks, right? And then Bob, you became president of DBA in 2001/2002?
Bob Morris: In 2002, I think.
Michael Flock: Yeah. So what were your biggest accomplishments as president of DBA then? And what were some of your regrets?
Bob Morris: Well, I just relied on everything Walt told me.
Walt Collins: No, things went too well for you.
Bob Morris: I’ll echo a lot of what Walt said. And it takes I think the flavor of people like Walt’s experience to bring in some of the early themes of what made Debt Buyers what it was. And the theme of self regulation was something that I think came out pretty early. And I think we were all on that bandwagon as a group. We knew that the pioneer days, the salad days of this business, some have compared it to wolf of Wall Street. I hope that’s not –
Michael Flock: The wolf of Wall Street?
Bob Morris: No, let’s not go there.
Michael Flock: Yeah.
Bob Morris: But it was a business that was done haphazardly in the beginning and began to take shape for me when I met Dennis Hammond and Judy for the first time at the Ritz in Atlanta, Georgia. That was the first real, for me, debt buying anything that I’d ever been to and the first time that I’d ever seen it proclaimed as its own industry. Before that, it was a handful of small transactions. And it was something that we felt strongly about still do today. It’s a business process outsource solution that needed to happen in an era that is much different than today. In an era when consumer credit aggregates were growing in the high teens every year.
In an era when banks like First USA sent out a million pieces of mail every single day, and our mail boxes were stuffed with credit opportunities as compared to now. Just a totally different environment. I think there’s –
Michael Flock: And Bob, let me just interject for our listeners here that you had founded Oliphant, a debt buying company in Florida almost was it 10 years before you became president of DBA? Wasn’t it the early ‘90s?
Bob Morris: It will be 25 years a year from now.
Michael Flock: Okay. So you had been then a debt buying founder for several years. And I think that probably helped you then shape your view of how to lead DBA back then just as it did with Walt.
Bob Morris: Well, in the early days, it was the guys like the Oxford Capital guys that eventually became Credit Trust went into NCO. There was a guy that none of you know that jumped in the business for two years, couldn’t handle the amount of data he was working with, and we eventually took over his operation. But it became clear to all of us in our own independent ways that wouldn’t it be great if there were some best practices that the industry could adhere to that we would recognize ourselves as a group and lobby for those best practices. I can say one other thing.
This sort of spirit that I think was in all of us at the time was we were revolutionizing collections back then.
Michael Flock: How so?
Bob Morris: The banks had been working this, in the early, early days, all there was was old paper. These are accounts that had been collected on through multiple agency placements. And here come these debt buyers buying direct from creditors that weren’t even auctioning prices. They were dictating the prices in the early days. We wanted to be different from the beginning. And so I can tell you, out of compliance today for sure, but our first letters did, in fact, proclaim that we weren’t a collection agency. We didn’t want to be that. No offense to the collection agencies, but we figured we had a different angle on things than what had been attempted in the past.
So we tried a very, I thought, consumer friendly approach towards people. And I think everybody at this table has sort of embraced that in their own shops. It was just a totally different culture because we had the longevity. Walt used to call it the patience of the capital investment over a long haul because it takes time for somebody who goes through what we call a life changing event, whatever it may be, it takes a long time perhaps for that person to recover and even be able to make a small payment towards an outstanding balance.
And then, on top of that, we were slashing balances to make them realistic, to make them fit the current situation, to incentivize, almost to resell those consumers back into paying an old obligation. We slept well at night, I have to tell you.
Michael Flock: So being consumer friendly then was what you would call then revolutionizing the industry, which, obviously, wasn’t known for that prior to the 2000s.
Bob Morris: Yeah. Does anybody else want to comment on that specifically? I remember talking to all of us at the time, and it seemed to be an effective way to deal with a lot of people.
Mike Cushing: Yeah. And they’d want to settle. You were actually helping them. So by doing that, you got to send them a letter and then a response, but we actually worked with the debtors to help them work. And we wanted the guys to come back, as you said, to get recovered so that we could be able to help them help themselves. And that was fairly unique and a change. Now, all of the ARM industry is following that. But it was really started to build, I agree, with how debt buyers treated it.
And they also had the long term. Instead of being an agency having it for a three or six month placement, and you need to get it all paid today, it would be gone, we had the long term strategy of being able to put somebody in a payment plan for a longer period of time and work with them and what they needed. And that has become part of the ARM industry. And I think the debt buyers’ and their ability to have a longer term look at it has been a big part of that.
Bob Morris: Yeah. We used to have the wall of praise. My agents would actually make friends with some of these consumers. We had a guy in Alaska send us smoked salmon every year, years after he’d finished paying. He was the nicest guy.
Michael Flock: A debtor sent you smoked salmon?
Bob Morris: Every year, and nobody liked it. It always ended up in the fridge.
Mike Bendickson: To that point, we started calling, you used the word debtor a minute ago, but we started calling them consumers, and consumers, long ago, before it was even politically correct where I came from. And a lot of companies started making that switch. I, actually, believed the debt buying industry moved the word from debtor to consumer, and it wasn’t the collection agencies. But it was actually the debt buyer that moved it to consumer. So the practice of helping get these consumers back in the cycle, settling at a reduction, like Bob was saying, and offering these people a steep discount and helping them be able to – back then, many of us reported to the credit report.
And we were able to update that as a paid cycle. And it actually helped their credit in the long term. Things have changed a little bit, and we can’t necessarily report the way we used to where we could actually update it to that same thing. So but to Bob’s point, I think that the debt buying industry itself operated very different from the collection agency world. And, frankly, not all collection agencies loved debt buyers in the early days. You would get flack if you showed up at ACA sometimes from certain people. Nothing against ACA. It was just their members were of the belief that you took a receivable to collect it, and you didn’t purchase it.
And the debt buyers turned up that whole model and said there’s a better way of doing it and using a lot more analytics behind it. So to Bob’s point, I think he was 100 percent right. The debt buyers really helped shape the customer and the consumer and getting them back into the system treating them very different from how they had been treated in the past 100 years through this traditional collection agency process.
Michael Flock: So Bob, was that one of your big accomplishments then as president of DBA back in 2002 to initiate this consumer friendly culture?
Bob Morris: No, no. I didn’t invent that. I would say that was part of the entire industry.
Michael Flock: Okay.
Bob Morris: What I tried to do, I’ve always been kind of a tech oriented person. And I created something. I had the support of the guys that were handling the sales at Discover Card and a couple of other banks that I’ve always believed that technology is something that can help this business. And we can get into that if you want, but I’ll try to avoid that as a subject. I created –
Michael Flock: Bob is the one geek here at the table having founded Beam, one of the leading software companies in the industry now that many of us use. But go on, Bob. I’m sorry.
Bob Morris: Well, I created the Universal Debt Browser, and the idea was, in an era when the banks were sending out Fed Ex envelopes with CD’s before secure FTP and a lot of nice things like that existed, I wanted to create security around information that we were handling. And for about $6,000.00, I worked for weeks with a very talented developer that I had personal friendship with. And he coded this thing. And it really worked. But, you have to remember, it was a prototype. Do you all remember it? Did you remember seeing it operate?
Michael Flock: The universal browser?
Bob Morris: It was sort of a locked up PDF for trading receivables. That was the idea. You would get this secured file, ultimately, to be encrypted. And then, at the end of that process of reviewing it, it would be self deleting so you couldn’t open it again using web authentication and being able to have a key to open it again. And then having a difference between a sale file and a full fledged file. It did things like redacting names, addresses, social security numbers. It did some pretty cool stuff. I was very proud of it. But it didn’t have the fullness to really take effect at the time. I think it would have taken some more work. And who knows? Maybe we can still do it.
Mike Bendickson: Well, you were light years ahead on redacting information. We just saw by the CFPB’s recent announcement in the last month or so that they’ve now mandated masking of data files. So that was what Bob did back in the day was light years ahead of what –
Michael Flock: He was ahead of his time.
Mike Bendickson: So kudos to you, Bob.
Bob Morris: Thank you.
Michael Flock: So let’s turn to Mike Cushing for a second. Mike followed Bob, what, five of six years later. I think you were president in 2009. And Mike recently was an officer with Four Score, head of their business development. And he’s just recently started his own consulting practice in compliance and operations. Mike, do you want to comment on what your biggest accomplishments were at DBA?
Mike Cushing: Yeah. And to see, as an individual, because the board worked very well together. And to say as a president that you did something would be a misnomer. And so I would say what the board did and the continuity to it and during my tenure as president and prior to that, we got involved a lot more in the federal legislative approach. Getting onto the hill, getting involved in that, trying to get ahead of some of the rules, trying to get in front of people letting them know who debt buyers are, what we were doing. And so I would never say that was my accomplishment. But during my tenure, we really started to jump into that and get ahead of it.
And the Debt Buyers’ Association has done a fine job of continuing to do that because we always knew we’re never going to get a debt buyers’ bill of rights through some place. But, at the same time, too, when there’s legislation being written that has verbiage that doesn’t make sense and is not in the best interests of not only the debt buyers but, often times, the consumers. It’s not in their best interests also. I think that was something that was accomplished during my tenure that I think the DBA should be proud of because they really did a great job of doing that. And during that period, we spent a lot of time and money in trying to do that.
And I think that’s helped the association in its identification. And I think it’s helped us try to curb some of the things that could go really crazy. So please, don’t let me take credit for it. But I say as an association and the boards that we worked with that was super important and a good accomplishment for the industry and for the association as a whole.
Michael Flock: But you came in at a really interesting time right after the crash when the home market just plummeted. And I remember, actually, working with Oliphant then that the prices on credit card debt, when you took over, Mike, were, what, fresh? Was it $0.04 or $0.05, something like that?
Mike Cushing: Yeah. The only regret, you were asking for regrets, that I didn’t buy more paper back then at those prices. That’s really my only regret.
Michael Flock: Okay. I mean, you had it easy compared to the folks today, Mike.
Walt Collins: Let me amend my – I second that.
Mike Cushing: And another thing that I would say about this industry, we’re all sitting here, we’re all friends. And there are not a lot of industries that people are friendly competitors. I mean, we bid, you win, great. Good for you. If you paid too much, shame on you, or good for you. But at the end of the day, it’s a great industry of people who have really watched out for each other. And I’d also say, even before this, when we hear about bad debt buyers, we hear about someone that’s not good in the business, we’re calling around and talking to each other to make sure everybody new that’s part of the guys that are doing it right to identify that.
So, as an unofficial oversight, but there was a lot of that. And I know it saved me on a number of occasions. And I’m sure everybody at the table has had an opportunity where I didn’t know about that guy, and somebody told me, and I’m sure glad I didn’t do a deal with him.
Walt Collins: I’m glad you said that, Mike. I come out here every year to see these guys.
Michael Flock: I think there’s a lot of mutual respect is what we’re saying here today. Not just amongst you folks but I think the whole industry. People that have been successful and have done it the right way, being consumer friendly, being compliant, being certified. Rich?
Rich Munroe: Yeah. A lot of people don’t realize that the terms for president are a year. In some unique cases, they were two years. But a lot of us have spent 15 years on the board. And a lot of relationships have developed. It’s a voluntary association. But I think a lot of us really enjoyed being around thought leaders and mutual respect. And it’s been really a good experience from that standpoint. And it’s been developing relationships with all of the board members over that period of time. It wasn’t just your one year term as president. It was an evolving process over that period of time, which has been great.
Michael Flock: Well, speaking of two terms, Mike Bendickson, next, I think had two terms. And, in fact, Mike has got a pretty interesting story. I’ll never forget him telling me how he got started in business selling Kirby vacuum cleaners door to door. And he’s gone from that to being wildly successful as founder and CEO of Absolute Resolutions, one of the leading debt buyers in the country today. So Mike, you’ve got tons of stories. Can you tell us, when you were DBA president, what were your biggest accomplishments? And did you have any regrets? And you must have loved it because you did it for two terms.
Either that or you’re a glutton for punishment.
Mike Bendickson: Which is why we have term limits now.
Mike Cushing: Regret, second term.
Mike Bendickson: I’m kidding you. I absolutely, thoroughly enjoyed working with people. I got to know Rich really well. I and Rich both got elected to the board the same year. We spent a good 14 plus years on the board together. It’s interesting because the one thing that I tell people all day long is get involved with the association. You’ll find out what’s going on before everybody else because you’re talking to the right people, whether it’s regulators – I’m not saying that that was my success or that it is a – but it’s an important part of what made ARC is I got involved with an organization. My right hand people, Mark and Ivan, they’ve all gotten involved, whether it be NARCA or DBA or ACA.
It’s getting involved, and you’ll stay up front of all of the issues that are coming if you are involved. But I was very fortunate to have a great board team and very experienced people. My biggest accomplishment on the board, I think the board getting certification through. DBA certification, as we have it today, it was not an easy one. It was heavily debated in the board room itself. And then we had to sell it to the members. And good or bad, most members tell me they’re super excited, and they’re glad to see that we have that. And then I hear from some others that can’t believe we put board certification on them.
Well, certification is, on a scale of 1 to 10, a 2. And if you’re buying from the banks, you better be playing at 10. So the certification is a basic where you should be involved in this industry. These are some basic things you should adhere to. But if you’re doing business with the banks, you better be doing it at a much greater scale because, if you think the DBA certification is tough, I can tell you, as somebody that’s approved by for most of the major banks, it’s much tougher having a room full of auditors come in and really dig through everything you do, every policy and procedure, every how you do it, why you do it, and those procedures.
Michael Flock: So it’s necessary but not sufficient for the banks. Is that what you’re saying?
Mike Bendickson: That is accurate. That is accurate. It’s necessary. It’s a minimum requirement, I can tell you that. Almost every bank requires you to be certified of the major banks. But it’s a minimum. There are many other things that sit on top of that. But looking back at just I was fortunate Gary Wood was my mentor on the board when I joined. If I ever had a question, who did I turn to? It was Gary Wood. Walt, you weren’t there when I got on the board, so I couldn’t turn to you. But you passed good information on to Gary because he passed on a lot of good things to me along the way.
Walt Collins: Gary was my president for 10 years. That was the greatest hire I had ever made.
Mike Bendickson: I thoroughly enjoyed working with him, a smart guy, and he’s missed here today at this meeting.
Walt Collins: He lent a lot of credibility to the industry. Here comes a fellow PhD economist, Baylor economics professor, headed up their Governmental Affairs Department, two terms Dallas Federal Reserve Board, chief economist Republican Party Policy Committee for the US Senate, then back home as president of our Texas Research League not for profit think tank business for Texas. To have that fellow in our industry, and then he was one of the finest podium economists you would ever want. Then he became a lobbyist for us. He lent a lot of credibility early on to what we were doing.
Mike Bendickson: Absolutely. I was fortunate, Gary was my mentor on the board and really kind of helped me navigate some of the processes. And we saw a lot of changes during my tenure. But there were so many great things. And I think Rich, what he did, and get the involvement that, when you get to him on state leg, Rich put it together. And state leg is where it’s at these days. You’re fighting 50 different states. And it’s just there were great people involved, and everybody that gets involved finds – I’ve never had anybody join the board and say this place sucked, and I wish I had never done it.
At the end of the day, looking back on it, you’re like this was great. I learned a lot from it. I learned a lot from the people I work with. But there’s a lot of work. Don’t get me wrong. You run for a board seat, it’s not heading to conferences and things like that. It’s work. There are meetings. You have to run committees.
Michael Flock: Is that why your only regret was the second term?
Mike Bendickson: It’s a lot of work.
Michael Flock: But it beats selling Kirby vacuum cleaners, doesn’t it?
Mike Bendickson: It sure does. It sure does. On that Kirby vacuum, I am a good sales person. I once sold a Kirby vacuum cleaner with all of the attachments to somebody that had hardwood floors only.
Michael Flock: Wow. That’s wonderful.
Rich Munroe: Just to touch on the committee structure because, you know, Mike, I know you mentioned certification was one of the things that you worked a lot on, and you did. But I think the whole committee structure concept was really brought and put into place during Mike’s term. And that’s one of the reasons why the board, at that time, felt it was necessary for Mike to go a second term because we had so many different things going on. We had the certification starting. We had the committee structures being put in place. And then we also had the internal staff that we were putting in place with the DBA staff that we have today.
Prior to that, it was all outsourced for event coordinators. And there weren’t any dedicated resources. So back then, it was really the board that did a lot of the heavy lifting. So with state legislation, it used to be a week and a half before a hearing, myself and Barb Simms would be on a plane rushing over to North Carolina or Oregon or wherever we needed to go. And that was our state leg committee. So with Mike’s leadership putting in a committee structure, not only in state leg but in all of the other areas where the association needed to focus on, it was a big impact on where we are today.
We probably have 75 plus DBA volunteers, 2 or 3 people within each state so that, anytime there’s a pending legislation that comes up, we’re not waiting to react. We’ve already got boots on the ground. That’s critical with the state legislators to know that they’ve got companies that are local to their constituents employing employees in their local areas and setting those meetings prior to that legislation getting written and proposed. And being able to have a seat at the table to contribute to a lot of that language that gets put in the bill. So as you guys know, over the last 20 years, the state leg has went from nothing being referenced about debt buyers to everything.
There were months where we would have five and six different state pending legislations all at the same time. So kudos to Mike with that committee structure because I think that’s one of the things –
Walt Collins: Kudos to all of you.
Mike Bendickson: Yeah. Kudos to Rich because state leg, the first year or two, there were meetings every week, sometimes two and three. And he had to be at every one of those. He had to get members from every state to get involved, find them, create committees.
Michael Flock: Every state?
Mike Bendickson: Every state. It was unbelievable. And he did a phenomenal job putting the state leg committee together today that exists, and he put it together the way it’s running today –
Walt Collins: The later presidents, after the first two or three, the industry became far more complex. The presidents after the first couple really had so much more to deal with. I was so proud of all of the effort and all of the things that they did. It just became so much more complex. You guys just did a fabulous job.
Rich Munroe: Well, it was guys like yourself and Gary Wood, like we mentioned, Roger Kanoff. Mike Cushing was the guy that recommended that I run for the board back them.
Mike Cushing: Sorry.
Rich Munroe: Roger Kanoff was the guy that nudged me to get involved with state legislative issues. Back then, I did a lot of state sales for the company I used to work for and then for my own company when I formed Capital Financial Group with Jim Curry. And it was a natural thing for me to get involved on the state level because I had a lot of contacts with a lot of state buyers. So it was the guys that came before us that kind of nudged us in those directions of where it made the most sense for us to fit that I think helped tremendously as well.
Mike Bendickson: I want to add one other thing. And the staff at DBA, the amount of work that they put in, whether it’s the executive director, Jan, or all of the staff members. Just the level of – as somebody first joining the board, I had no idea. And Walt got to see it with Dennis and Dennis’s staff. As the industry changed and evolved, and as the association grew from 400 to 1,400, we all saw a big change. And the staff is much larger than it once was. It’s more active. And really, today, I think the staff more helps lead the board in some of the initiatives. And Rich probably understands that more than me as one of the recent presidents.
Michael Flock: Well said.
Rich Munroe: In today’s environment, it’s very, very challenging, as we all know with the ability to continue to acquire consumer debt like we’ve all been used to. So, one of the things that I wanted to put in place during my presidency was making sure that we kind of widened the scope of looking at new asset classes. And we hired a dedicated person on DBA staff, Marianne Kelly, who has done a tremendous job of reaching out to other associations to form alliances with their members for them to participate in our conference and for us to participate in their conferences and kind of widen the net to utilities, to healthcare, to tax liens, to all other different types of asset classes that we all know are out there that there’s consumer debt that need solutions.
So I think that’s one of the things that is still continuing today that we have to continually look at new asset classes to be creative and find other opportunities.
Michael Flock: That’s kind of a perfect segue, Rich, to talking about what I think is kind of the future now of DBA is how do we help our members? How do we help them grow? How do we help them reinvent themselves? And I think, just for our audience, Rich, so that they know who you are, Rich has had several debt buying companies in the past, the most recent of which is one that has focused on buying tax liens in the southeast. He’s also on the board of Lend Street, which is a new debt settlement company.
So Rich, I think, is symbolic of kind of where I think the industry has to migrate to because I think so many of your companies have really talented people. They’ve got lots of either good technology and/or data that can be leveraged in other asset classes. So I think, Rich, why don’t you comment some more about that about what you’re doing in new asset classes? And then I think your accomplishments, too. We’d like to hear a little bit more about what you did primarily with the state legislature work.
Rich Munroe: Well, I was heavily involved on all of the legislative work that we did with the Attorney General’s strategy, the Consumer Financial Protection Bureau, the FTC. We continue that work today to work on the FTCPA reform. So those were a lot of things that were going on during my term and still today, which one of my regrets is that I’m not still actively involved to see that through because, obviously, the FTCPA was written in the ‘70s and needed to get updated with all of the different technology we have today. And that’s one of the things that I think is critical to make sure that we help clearly define how that should impact collection agencies and debt buyers going forward.
But back on the tax lien industry for a little bit, it’s something that I started investing in back after the crash when the stock market became not as lucrative. And really, I just started using my personal money in the tax lien space. It’s an industry that’s been there for 40 or 50 years. A lot of institutional players are there that it’s more of kind of an interest play. And it’s actually very similar to the debt buying space. You’ve got a delinquent debt, typically property taxes. The county government has to continue to run. And so they will auction off the delinquent taxes to investors that would, basically, inherit the same rights as those county jurisdictions with first lien position, superior position.
Each state is a little bit different. They either sell it as a lien certificate or as a deed. And then there’s, typically, a redemption period of which the property owner or anyone that has title to the property can redeem and pay the penalty. In my state, Georgia, it happens to be one of the more favorable ones. It’s a 20 percent penalty. And whether they pay a month later or 12 months later, it’s 20 percent. After the 12 months, it’s an additional 10 percent. So once that redemption period is gone, you’ve got the ability to foreclose on the property and then, basically, sell that real estate out and keep moving.
So there’s really two different outs there. It’s either you’re going to get paid with your penalty return, or you’re going to seize the real estate and, basically, sell it through a wholesale process. So it’s kind of a slow burn. It’s a long process. But it’s very similar in that there’s legal work that’s required. So you’ve got to have an attorney in that state that’s familiar with the laws and familiar with the tax lien foreclosure process because it’s very different than the typical foreclosure process. And it’s very much different in various states. So there are three or four different states that I currently focus in.
And it’s something that’s kind of grown over time. And I think it’s going to be a fruitful business long term.
Walt Collins: Rich, can I ask you a quick question because I’m very concerned for the DBA. I’m concerned about ongoing relevance. That asset class, has anyone required you to be a certified debt buyer?
Rich Munroe: The actual sale process is, basically, secured by real estate. So it’s not really considered a consumer debt. So there’s not a requirement in that industry right now for certification. In other words, the sellers of the debt are not creditors. It’s county and city governments.
Walt Collins: And for the last two years, I don’t think we have purchased – and we have purchased consumer debt. We look completely different than when we did when I sold the company in ’06, completely. We’ve had to reinvent ourselves. I’ve never been asked if I’m a member of DBA or if I’m certified. And I’m really concerned. Please stop me if I’m getting off of where you want to be. But I wanted ask these fellows, I think, on an ethics committee meeting that you and I are on, I made this comment. I liken what’s going on, in my view, to having a securities firm in your home town. And if you’re securities firm comes under attack for whatever reason, it will put you out of business.
You could be accused of something that you’re innocent of, you will be proven innocent. But people stop dealing with you. Goldman Sachs, they’re found guilty of fraud and everything else every other day and fined millions and millions of dollars. And they’re still doing business every day. And so I look at what’s going on regulatory wise, and it appears to me that there’s a huge squeeze on knocking out the small to medium, sized debt buyer certified or not. And then, the restrictions now, the prices are one thing. Then, it’s you can’t resell. You can only sue 8 percent of the portfolio.
I’m really concerned about the DBA in the current environment. I think the regulations, if I’m a creditor, and I’m being pounded by the CFPB, I have no problem selling to Encore and PRA. They have deep pockets for the funds.
Michael Flock: I’m glad you brought that up, Walt, because when we surveyed all of you about this panel discussion today that DBA relevance was No. 1 in almost all of your responses. So maybe we should open that up. Mike, do you have any thoughts on DBA relevance for the small/middle market?
Walt Collins: There are not a lot of small and medium sized companies like you, Mike.
Mike Bendickson: And here is what I would say to that is you have to start out somewhere. And if you’re not going to play by a universal standard, and that’s where I’m going to go into the certification, but it’s going to move into other things. As Rich spoke of earlier, I know under his term as president, you guys worked to open up many new markets. Not all markets or all vendors in certain markets or sellers are going to have a policy that says you have to be DBA certified. DBA is out there educating on the certification program to give comfort. It’s not DBA’s job.
And I’m a big believer of this because I’ve had many people come to me and say I need deal flow. DBA needs to [inaudible] [00:39:42] deal flow. Well, that’s not DBA’s role. DBA’s role is, actually, for you all to get together, the makers of the industry, and talk about what’s going on and give you guys a place to network and talk about the products that assist you in doing a better job for what you do in your own business.
But what I’ve said to many members, if you’re sitting around waiting for your phone to ring because somebody has got a credit card portfolio to sell you, you’re going to be waiting a long time for that phone to ring because the industry has already changed very differently. And even some of the smaller, regionalized banks, they have the same rules that the big banks do on the resale. And one of the minimum requirements with most of these smaller banks is DBA certification. So it hasn’t affected all industries. As things change, I gather that it probably will affect more industries and that people will want to know that they’re doing business with companies that have credibility enough for the certification.
But where is DBA’s relevance? I think DBA’s relevance is bringing everybody together. Considering that the market has really shrunk in terms of what’s out there, there’s 1,000 people downstairs, guys. So 1,000 people came together to talk about deals or whatever they can do to talk about bringing industry together. So DBA’s relevance is about bringing people together. It isn’t DBA’s job to actually deliver product, in my opinion anyway.
Bob Morris: No, but I would like to see it participated in the regulation of the markets to a greater extent than it does today. Again, a lot of that goes back to a technical solution, I believe. And the market has shrunk relative to the number of people buying. It hasn’t necessarily shrunk in terms of the – charge offs get produced no matter what.
Mike Bendickson: But charge offs are way down right now compared to five years ago.
Bob Morris: They are, they are. But that was true back in the day, too. You had this little three to five year cycle, and it was derived from the amount of outstandings. And that would be about what the market was. That was always Dennis Hammond’s approximation, and we thought it was a good method. And I think it still is today. But if you look at consumer non mortgage debt and the G19 release, you get that one little notch at the mortgage crisis. Otherwise, it’s continuous growth curve. You’ve seen credit cards give way a lot to the installment paper. During their hay day and the early days of Debt Buyers’ Association, credit cards grew to as much as 45 percent of all consumer mortgage debt.
Having grown from about 15 percent in the ‘80s, now, it’s maybe in the low 40’s now or maybe even high 30’s. So the nature of the paper that’s out there is certainly different. It’s still there, but let’s just recognize the fact that it’s not in the rest of the market because where it gets sold is where it ends.
Mike Bendickson: Less sellers. We’ve got a lot of the big sellers sitting on the sidelines. Until CFPB rolls out with what the rule making looks like, we’re not going to see it. Until the additional markets open up that volume has to hit the market. There is, absolutely, for every company out there, I don’t care if you’re one of the big publics or one of the small to mid size, you’re facing a product flow issue because the product flow isn’t there to support as many that are in the marketplace. And you have some very large players that tend to be able to take the very large deal. But when you have three of the biggest banks sitting on the sideline out of five, that’s going to affect product flow in the marketplace.
That’s not going to help the guys that are looking for something on a state or regional basis, and they have to look at other markets. I always say this, there’s a ton, whether it’s the buy here, pay here lots, it’s the pay day industry, or it’s the local business to business, there’s a ton of business at a local level. And I’ve spoken on many topics. And one day, I just drove home from work and said who has got debt for sale. And, literally, driving home, I came up with 20 different things that I could buy that I guarantee you there were some write offs there. Would it be to the volume of a big pool of credit card debt? Absolutely not.
But there is volume there to support the smaller player in the industry. Is there a place for a state buyer at a national bank? I’m not so convinced of that, but I don’t want to speak to the banks.
Michael Flock: We’re going to have to wrap it up. Do folks have any parting words of wisdom for the new president, Trish Baxter, who is coming in next week to take over for Kaye Dreifuerst? And she’s obviously at a pivotal point here as we approach our 20th anniversary of DBA at a time when Mike was just explaining how bad the supply is, how creditors are sitting on sidelines. Walt opining on the relevance of DBA. Rich talking about although new opportunities and new asset classes. Can you guys quickly summarize for our audience here what advice, what words of wisdom, would you have for the new regime coming in at DBA?
Bob Morris: I’m going to throw out one thing that I’ve been saying for a couple of years. And I think we’re all going to nod when I say this, but I’m sick and tired of picking up the New York Times and seeing another bad story on debt purchasing. I think that there is an underlying positive story here. This business still makes sense. The creditors are sitting on the sidelines because they’re waiting. They don’t want to be the first water buffalo to cross the river of crocodiles. But, eventually, I think the ones that are considering it will, ultimately, be back in the market. But you’re still going to have a limited marketplace in that you won’t be able to resell.
But if there’s one thing I could change right now, aside from normalizing the market with technology, it would be to help change the face of the perceptions of an industry that’s often maligned by criminals that are no more a pilot than somebody sitting in a cockpit. Have we ever considered hiring an ad agency?
Mike Cushing: And that’s a very true story because it’s a picked on industry, and there are bad players in it. And so it’s not that we are a bunch of bad players, which it has been painted with a lot of the media and using stories that are similes of this one event that may have happened, which is really not representative of the industry as a whole.
Mike Bendickson: And it’s easy to paint collections as a whole, the debt collector themselves. So it’s easy for the New York Times to write a story like that. It plays to the general population. And because the New York Times says it is doesn’t mean it is.
Rich Munroe: And we touched on this point earlier, too, the fact that emphasizing the fact that we are working daily with consumers. And we’re helping consumers better themselves. And they’re not a debtor. They’re not something with a label. They’re neighbors. They’re family. They’re people that have come on hard times that need help and need time to recover. And debt buyers do that. And those are the things that we need to kind of get out there more from a PR standpoint and talk more about how we’re helping the consumers because that’s really the key.
Mike Bendickson: And Bob, to your point on the advertising and trying to get some kind of national message out there, DBA, I know when I was on the board, we debated this. I’m sure they debated it under Rich’s presidency. It’s kind of been a topic of the last few years. With the amount of capital that it takes to get a national message out there about what the positive side of our industry does, we have gone down this path. We have looked at it. And when you look at the sheer numbers of what to sway a message like that is, it’s phenomenal. DBA doesn’t have that type of money.
Bob Morris: Well, it’s called You Tube. And let me tell you something. My son is a video editor as a hobby. And I’m very proud to tell you landed a job with a band that has completely based its career on You Tube. And they’re ranked in the top 80 You Tube channels in the world with 55 to 65 million hits a month. So you don’t need big budgets to get your word out there anymore. It’s an old fashioned way of thinking.
But if you got the right story – because one of the things that I would argue with anybody that’s dissing our business is that we are an undeclared form of social welfare that takes balances that were owed, at one point, and turns them into viable solutions for somebody that otherwise couldn’t have paid that balance. And it’s the debt buyers that created that environment. Sorry for my voice. And I take issue when I see these newspaper articles and these TV exposes because it’s so not us, it’s not even funny. And that’s why I just want somebody to tell our side of the story. I want them to know some of the good things we’ve actually done.
Mike Cushing: And they never bother to ask in the article do you owe the money. And that’s never a part of it. Well, hey, yes, I borrowed this money. It’s always this is what happened to me.
Mike Bendickson: Doris debt collection sexy. And that’s what sells. Just like a good band could sell on You Tube. We put a You Tube announcement up there about the positives of the debt collection industry, I’ll bet you it gets very few hits just compared to the band.
Bob Morris: But that’s why you need an ad agency. You have to do it with humor. You have to tell a story. And people have to want to see it. And chances are, you need a thumbnail with a bikini on it, you’ll get a few more hits.
Michael Flock: Well, in conclusion, I’ve just got to say, after listening to you guys for the last 45 minutes, I’m cautiously optimistic that I think DBA is going to have a new life because I’ve known all of you in different venues. And many times, you compete with each other. But then, many times, you partner with each other. And what I’m hearing today are all of these shared values. You have the same values. Treat the consumer fairly. Take care of your team. Get into new markets. And then, there’s also a lot of mutual respect, and I think it’s genuine. The compliments that you’ve had for each other, what you did at DBA.
And I think it’s really typical and symbolic of the culture that, over time, I think has been created here. And I think it’s wonderful. And I think, in conclusion, I think was it Mike or Mike said DBA brings people together. And just the communication in and of itself is important. And that’s what we’re doing here this afternoon. And I think it’s also positive that after this horrible shrinkage of the industry between the decline in charge offs and the CFPB over regulation that we have 1,000 people here today, which is almost as much as we had last year.
Mike Bendickson: Amen.
Michael Flock: It’s wonderful. So I am leaving this panel discussion today feeling very optimistic about the culture that you guys together have created. And I think, going forward, that’s going to sustain this industry and reinvent it in the future. So I just want to thank you all for your time this afternoon. I know you’ve got a lot going on here this week. And I appreciate it. And I know our listeners do, too. So thank you very much for your legacy to the industry.
Rich Munroe: Well, thank you, Michael, so much for putting this together. This has been a great experience for all of us.
Michael Flock: Thank you.
Duration: 52 minutes