Collector - March 2021 - 36

CREDITORS

Cavallaro: Because there is a lot of
variation in these new loan terms, you
must look at the underlying paper and
break down all the nuances such as
whether you have a two-year versus a fiveyear Paycheck Protection Program (PPP)
loan. Th is creates the need for a lot of
manual intervention.
Lahn: How long will another round of the
PPP delay the inevitable enforcement actions?
Zdravkovic: The new PPP loans will
help the hardest hit industries, but
financial companies are gearing up for an
acceleration of defaults in Q2 2021 and
going into 2022. Government stimulus is
helpful, however the solution is getting
employees back to work and restarting
commerce in a safe way.

Cavallaro: A six- to nine-month
window gets us to where things start to
change. The government put a Band-Aid
on a broken arm, and we will start to see
another wave of events shake out in Q2
or Q3 of 2021.

ACA'S TAKE
The financial services industry has taken
lessons learned from the Great Recession and
applied them to the economic distress that
accompanied the pandemic. Bankers and
creditors have striven to meet their customers'
changing needs, offering PPP loans to
businesses, fee waivers, reduced or deferred
payments, loan modifications and extensions,
as well as foreclosure and eviction relief. Most
banks and creditors also voluntarily paused
litigation and held back on repossession
efforts. The focus within the industry has

been to take broad, proactive actions to
help meet the needs of customers and limit
economic damage to help grow the recovery.
There is no clear path forward given the
multiple variables impacting the upcoming
timing and volume of defaults. Supporting
consumers with good communication and
creative payment options will help reduce the
tide of defaults and bankruptcies, but creditors
and collectors need to be prepared to ride out
the upcoming wave of defaults that will ripple
through the entire financial services industry.
Betsy Clarke is ACA International's
compliance analyst.
This article should not be construed as legal
advice or legal opinion on any specific facts or
circumstances. The contents are intended for
general informational purposes only.

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Collector - March 2021

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