Tough year for Debt Collectors, nearly 38% in financial difficulty!
It would appear that it is not just indebted consumers that are suffering with their debt burden. As we approach the end of a very tough 2009 the UK Debt Collection Agencies (DCA) industry are suffering as well, according to the new Plimsoll Analysis.
Plimsoll has identified 117 DCA companies that are finishing the year in financial difficulty. David Pattison, author of the new Plimsoll Analysis, is also convinced the market is due a prolonged period of consolidation with the number of companies in trouble leading to heightened takeover activity. He warned against the more reckless DCAs continuing to chase sales despite mounting losses, "There are a group of 44 serial loss makers still operating in the market. For the 2nd and even 3rd year running these companies have made a loss". Where this may cause consumer detriment should give cause for concern to consumers, the debt advice sector, the regulators (i.e. the OFT) and the Credit Services Association (CSA) the industry trade association, bearing in mind the CSA currently has only 310 UK members listed on their site. Visit the CSA consumer website.
At the same time, the CSA and the Debt Buyers & Sellers Association (DBSG) have announced their 'Collectability Index' for quarter 1 and quarter 2 of 2009. The 'Collectability Index' is a quarterly barometer to determine a debtor's ability to pay, measured by the volumes and values reported by their Debt Collection Agency (DCA) members. It is both an index of installment repayments and an index of settlements-in-full. These have stabilised in the first two quarters of 2009, following a continuous decline in 2008.
An average of 33% of consumers were able or willing to fully settle their debts in the first two quarters in 2008 which compares with an average of only 25% for the same period of 2009.
The Lending Standards Board - an independent body - will look out for the interests of borrowers and monitor the actions of lenders and their debt collectors from 1st November 2009. They will oversee the operation of new industry standards set out in the Lending Code. The new Lending Code includes rules which apply to:
- financial difficulties and debt collection
- helping customers in debt who have a mental health condition
Robert Skinner, chief executive of the Lending Standards Board, said: "The Lending Standards Board will ensure that the new Lending Code strengthens the protection customers will have when borrowing. It will independently monitor and enforce the Code and take action where lenders fall short of the Code's standards."
Kevin Still, Director of debt solution provider EuroDebt, commented: "The Credit Services Association seems to have taken a very pro-active approach in engaging with consumers, many of whom are in financial difficulty with unmanageable debts. The Lending Code places a clear obligation on lenders to treat customers fairly and this extends to the 3rd party collection agents they instruct. Regulators like the OFT are now exercising their powers more visibly, but we need to be watchful for companies that are struggling financially so that their practices do not detrimentally affect debtors - this may include chasing too aggressively for settlements-in-full or trying to negotiate unsustainable repayment plans. As a Debt Management Company, EuroDebt looks to provide protection to consumers under the OFT Debt Collection Guidance."