A Letter from the President
Our job at TAG is to help you maximize your cash flows and the value of your accounts receivable. My guess is that many, if not most of you, have not yet sold your first portfolio of charged-off accounts.
So what happens when you sell your accounts? Debt buyers buy debt that has been deemed uncollectible by the creditor (even those debts that have been worked unsuccessfully by a collection agency). The debt buyer will buy your accounts for a fixed amount, usually pennies on the dollar. While this may not seem like much money, this can generate the creditor immediate cash and eliminate the need and cost of dealing with the accounts in the future.
Many creditors have now made selling their accounts a regular strategy in maximizing the value of their charge-offs. We’ve been buying accounts for over ten years now and can offer you top dollar, as well as help you through the detailed process of documenting the sale. Count on TAG to help you with your next (or first) debt sale. Please give us a call at 1-800-205-0227 for more information and a free consultation.
Enjoy the first month of Spring!
Consumers Cash Out
Cash use is declining as consumers’ adoption of card–based payments increases, according to the 2005/06 Study of Consumer Payment Preferences, a nationwide consumer payment preferences study conducted by the American Bankers Association and Dove Consulting, a division of Hitachi Consulting and sponsored by ACI Worldwide, Citi, The Clearing House and MasterCard.
“Cash is the universal medium of exchange—everyone knows, trusts, and accepts cash,” said Jenny Ayres, EPN product manager at The Clearing House. "In many respects, each new payment method developed and introduced has been forced to compete with cash for a share of transactions, raising the question of whether that payment method is better, faster or cheaper than cash.”
To date, most of the measurable erosion of paper–based payments has come at the expense of checks, while cash has maintained its share of transactions at 33 percent of consumers' in–store transactions since 2001.
However, when asked how their behavior has changed over the last two years, 45 percent of consumers report using cash less often than they used to. In place of cash, those consumers are primarily substituting card–based payment methods. Of consumers reporting lower cash usage, 40 percent reported using credit cards instead, 31 percent PIN debit, 22 percent signature debit and 7 percent paper checks.
“Cards are becoming the preferred means of payment for a growing number of consumers, as plastic continues to displace cash and check,” said Trish Preston, senior vice president, Americas Debit Product Management and Development, MasterCard. “This trend is likely to continue as new payment innovations make paper payments obsolete and consumers come to rely on the convenience that credit, debit and prepaid can provide.”
An influx of new payment products and competitive migration tactics is threatening to erode consumers’ use of cash at the point–of–sale. Prepaid cards are beginning to replace cash at the point–of–sale for a subset of consumers. In particular are the personal–use prepaid cards, which 13 percent of consumers report having purchased. Contactless payments, designed for smaller types of purchases where convenience and speed are important, are targeting a space long dominated by cash. Contactless payments have yet to gain significant adoption in the marketplace (currently only 8 percent of consumers report experience using a contactless key fob and 6 percent have used a contactless card), but consumer interest is high, with approximately one third of consumers indicating that they would be interested in a contactless key fob or card.
Consumers have, are and increasingly will choose payment cards over cash to pay for their everyday purchases.
Use of Electronic Transactions Continue to Increase
The National Automated Clearing House Association (NACHA) recently released its fourth quarter ACH statistics, which show an increase in the number of transactions taking place via the ACH network. The network processed a total of 2,809,250,702 transactions in the fourth quarter of 2005 worth more than $6.3 trillion. This is a 3.56 percent increase from the third quarter of 2005 and a 15.03 percent increase from the fourth quarter of 2004.
Of these 2.8 billion transactions, 859,649,093 transactions were represented by the five eCheck Standard Entry Class Codes of ARC, POP, RCK, TEL and WEB. The eCheck transactions represented 30.60 percent of all transactions.
The greatest increase in eCheck services occurred with POP transactions, with a 41.58 percent increase from the fourth quarter of 2004. An ARC transaction is a single entry debit initiated by an Originator to a consumer’s account pursuant to a specified source document. The source document is provided to the Originator by the consumer via the U.S. mail or at a dropbox location. The Originator is the party originating the transaction, such as a merchant, collector, utility company, etc. There were 459,101,194 ARC transactions in the fourth quarter.
The number of POP transactions increased 10.81 percent from the fourth quarter 2004 to the fourth quarter of 2005, reaching 45,765,256 transactions. A POP transaction is a debit entry initiated by an Originator pursuant to a single entry authorization and a specified source document. The source document for a POP transaction is provided by the consumer at the point–of–purchase in order to effect a transfer of funds from the consumer’s account.
During the fourth quarter, RCK transactions decreased 3.20 percent in the past year to 5,770,861. An RCK transaction is a debit entry made when a negotiable instrument or other eligible item is dishonored and is subsequently electronically presented through the ACH Network.
TEL transactions reached 65,637,281 in volume which is a 27.80 percent increase from last year at this time. A TEL transaction is a single entry debit initiated pursuant to an oral authorization obtained over the telephone to effect a one–time transfer of funds from the consumer’s account.
Finally, WEB transactions totaled 283,374,501 in the fourth quarter. A WEB transaction is a debit entry initiated pursuant to an authorization that is obtained from the consumer via the Internet to effect a transfer of funds from the consumer’s account. There was a 40.01 percent increase from last year’s fourth quarter WEB transactions.
Survey Reveals Consumers Have More Control Over Identity Theft Than They Think
According to a recent survey, consumers have more control over identity fraud than they think. The findings show that despite growing fears, the growth of identity fraud is contained and that data compromise through the Internet is actually less severe, less costly and not as widespread as previously thought.
Identity fraud is defined as access to personal account information that leads to fraud. Identity fraud victims as a percent of the United States adult population have declined slightly from 4.7 percent to 4.0 percent between 2003 and 2006. Consumers need to be aware of the 63 percent of potential identity fraud that is under their primary control.
Key data points on identity fraud:
* The number of adult victims of identity fraud within the past 12 months has declined marginally between 2003 and 2006, from 10.1 million people to 8.9 million people, in the United States.
* The average fraud amount per case has increased from $5,249 to $6,383, over two years. As a result, the total one–year cost of identity fraud in the United States has remained relatively flat between 2003 and 2006, increasing from $53.2 billion to $56.6 billion.
* The vast majority of identity fraud victims (68 percent) incur no out–of–pocket expenses. This points out that businesses are victims of fraud as well.
* Victims are spending more time to resolve identity fraud cases, which has increased from 33 hours in 2003 to 40 hours in 2006.
* Most data compromise—90 percent—takes place through traditional offline channels and not via the Internet, when the victim can identify the source of data compromise.
* Lost or stolen wallets, checkbooks or credit cards continue to be the primary source of personal information theft when the victim can identify the source of data compromise (30 percent).
* Almost half (47 percent) of all identity theft is perpetrated by friends, neighbors, in–home employees, family members or relatives—someone known—when the victim can identify the perpetrator of data compromise.
* Nearly 70 percent of consumers are shredding documents, so that trash as a source of data compromise is now less than 1 percent.
Independently produced by Javelin Strategy & Research and released by the Council of Better Business Bureaus, the survey was, in part, made possible by CheckFree, Visa and Wells Fargo & Company.
Employee Participation in 401(k) Plans Continues to Decline
People aren’t saving for retirement like they used to—at least, not in their 401(k) plans. In 1999, participation in 401(k) plans stood at 80 percent, which means four out of five eligible employees put money into their companies' plans that year. Participation has fallen significantly since then, dropping to 72 percent in 2002 and 70 percent in 2005, according to the Spectrem Group study “2005 Defined Contribution Market Needs,” released last week. This represents a six–year decline of 13 percent.
Further, over the same period the percentage of salary put into 401(k) plans, known as the deferral rate, has declined 20 percent. The average deferral rate fell from 8.6 percent in 1999 to 6.9 percent in 2005.
“Workers appear to be losing their taste for 401(k) retirement savings, with participation in these tax–deferred plans declining 13 percent over the past six years and the percentage of salary put into them dropping 20 percent," said George H. Walper Jr., president of Spectrem Group. "Whether due to decreased enthusiasm for market exposure following the burst of the Internet bubble, generally poor market performance since that time, or other factors, declines of this magnitude could mean that many of today’s workers will find themselves ill–prepared for retirement.”
