Although the UK consumer debt collection market, now valued at approximately £500 million, returned to profit in 2010, margins remain significantly below pre-credit crunch levels with several operators having invested to purchase debt portfolios as a way to secure business for their collections operations.
During the recession, conditions for collections agencies have become far less favourable. Consumers have taken steps to reduce borrowings, pushing unsecured debt levels below 2005 levels, while higher unemployment has led to more problem loans but also a far worse collections environment.
Therefore, agencies find that a higher proportion of debtors are simply unable to keep up repayments.
As of 2011, almost £60 billion of unpaid consumer debt had been passed to debt collection agencies, with government departments increasingly using agencies to recover outstanding money.
Most of the debt has been passed on by mainstream lenders, but utility companies and phone providers are also using debt collection agencies, as, increasingly, are government departments such as HMRC and the Treasury.
At the end of 2011, the credit services association (CSA) said its members were handling 32 million unpaid debt cases, the equivalent of at least one significant debt for every UK household. Six months previously the figure stood at 28 million.
Of the total in debt collectors' hands in December 2011, £31 billion was placed by creditors with debt collection agencies to collect, and a further £27 billion was debt owned by debt buyers.
It is not anticipated that there will be any immediate relief, with 2012 GDP growth forecasts tumbling, risk from the smouldering Eurozone crisis and the impact of government austerity policies prolonging high unemployment high and hence weakness in ability of the indebted to pay.
For more information on the UK consumer debt collection market, see the latest research: UK Consumer Debt Collection Market
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