ASX-listed debt recovery firm Collection House has swooped on the assets of ailing telco receivables management firm ACM, picking up the company’s entire purchased debt book with a face value of more than $400 million for just $40.3 million.
At a purchase price of just 10 cents in the dollar, the firesale is set to redefine the consumer bill collection sector, with Collection House telling the ASX on Monday that it will result in ACM, ceasing “collection operations after this transaction, with the founder retiring from the industry.”
The withdrawal of ACM from Australia’s debt chasing market is a watershed moment with privately-held firm, widely loathed by consumers for its tactics, with local telcos and particularly Teslrtrea among its biggest customers.
But despite its claimed high recovery rates – or perhaps because of the way it achieved them – ACM fell foul of regulators after the company was pursued by Australian Competition and Consumer Commission in a successful action for misleading and deceptive conduct in 2018.
The case saw a spotlight cast on the shady practices of the collection industry with the company found by the Federal Court of Australia to have engaged in misleading or deceptive conduct, harassment and coercion, and unconscionable conduct towards vulnerable consumers.
Tactics brought to light in ACM’s pursuit of Telstra bills was the relentless hounding of a permanently disabled stroke victim confined to a nursing home and a single mother’s access to credit being threatened.
The Federal Court finding by Justice John Griffiths also took sharp issue with ACM chief executive Paul Brabazon's answers described “non-responsive and designed to advance ACM’s interests.”
The hardball tactics of ACM also made some in the telco industry privately question the quality of some telco debt against its apparent book value. The lowball cash price of Collection House’s purchase appears to confirm some of those suspicions.
Notably, Collection House has sought to diversify its business out of the straight collections market with the company actively looking at how to use technology and more nuanced communications to consumers as a way to manage receivables rather than just writing them off.
A major issue big billers face is that when major billing systems screw up during upgrades or replacements, they can generate hundreds of millions in dud debt that finds its way onto the commercial collections market.
Collection House has high hopes for rehabilitating the ACM debt and relations with its customers.
“The ACM portfolio will benefit greatly from the application of our technology, skills and analytics. With over $400 million in face value there are significant opportunities to outperform our base case projections once were have had more time to assess the less active parts of the book,” said Collection House CEO Anthony Rivas.
Collection House said it will pick-up some of ACM’s headcount but is clearly not keen to take on everyone given recent regulatory friction.
“New employment contracts will be offered to selected Sydney based employees of ACM,” Collection House said.