Another growing industry being outsourced to India

While most industries are going to take a bath this year, there's one industry that's likely to enjoy explosive growth:

Debt collection.

The potential profits to be made from debt collection are huge. But is that enough for the companies in this business? No, they're outsourcing the function to India:

In a glass tower on the outskirts of New Delhi, dozens of young Indians are on the telephone, calling America’s out of work, forgetful and debt-stricken and asking for cash.

“Are you sure that’s all you can afford?” one operator in a row of cubicles asks politely. “Well, how do you take care of your everyday expenses?” presses another.

Americans are used to receiving calls from India for insurance claims and credit card sales. But debt collection represents a growing business for outsourcing companies, especially as the American economy slows and its consumers struggle to pay for their purchases.

Armed with a sophisticated automated system that dials tens of thousands of Americans every hour, and puts confidential information like Social Security numbers, addresses and credit history at operators’ fingertips, this new breed of collectors is chasing down late car payments, overdue credit card debt and lapsed installment loans. Debt collectors in India often cost about one-quarter the price of their American counterparts, and are often better at the job, debt collection company executives say.

“India will be the only place we grow this year,” said J. Brandon Black, the chief executive of the Encore Capital Group, a debt collection company based in San Diego. India is the company’s largest operating area, with about half the company’s collection force of more than 300.

Although the stereotype of a collector may be “some guy with chains and a cut-off shirt,” Mr. Black said, collectors in India are “very polite, very respectful, and they don’t raise their voice.” He added, “People respond to that.”

Companies like Encore buy bad loans from banks and credit card issuers for pennies on the dollar and pocket the cash they collect. The delinquent borrowers often owe at least a thousand dollars.

So far just a tiny fraction, maybe 5 percent, of American debt collection is done outside the country, industry executives estimate. But new business is in the pipeline.

Financial services clients are saying, “We want you to collect my debt, to analyze it and change the way that we sell” the loans, said Tiger Tyagarajan, executive vice president at Genpact, the business processing company spun off from General Electric that has roots in India. Genpact, which works with lenders to get customers to pay, rather than buying loans directly like Encore, employs thousands of debt collectors in India, Romania, Mexico and the Philippines, and is hiring in all those locations.

In the past, the prevailing wisdom about wringing money from late payers has been “if you’re calling the Midwest, you want someone from the Midwest to twist their arm,” said Mark Hughes, an analyst with Sun Trust Robinson Humphrey who covers the industry. That theory is changing as the pool of trained phone professionals in India and other locations deepens, and companies look outside the United States for lower costs.

Telephone debt collection represents new, more aggressive territory for India. “This is really a sales job,” Mr. Hughes said. “It is commission-intensive, and you’re paid on your ability to collect.”

Like many sales teams, Encore’s collectors in India gather for a daily pep talk before their shift. In one recent session, they were schooled on the intricacies of American tax policy.

“One hundred thirty million U.S. families will get a tax rebate this season” as part of the new economic stimulus package, Manu Sharma, the team leader, explained to a roomful of top-earning collection agents, most in their 20s. Those who qualify for the rebates will get as much $600 a person or $1,200 a household, he said, and “the I.R.S. is going to start paying this money in May.”

Start bringing up the rebate during calls, he told them. “This gives you an advantage so you can increase your wallet share,” he went on. “Get them set up on minimum balance arrangements” based around their tax rebates.

Aside from the fact of someone across the sea having access to the kind of personal information that makes identity theft easy, there's something about this notion of polite, soft-spoken people from India shaking people down for their tax rebates that completely encapsulates the American Condition in this last year of the Bush Administration, wrapping corporate greed, American consumerism, outsourcing of the American job base, the soullessness that is the call center environment and the false promise of the tax rebate into one horrific package.