Debt Collection Agencies Chase £60bn Debt

Debt collection agencies were passed almost £60bn in unpaid consumer debts to the end of 2011 with government departments increasingly turning to private debt collection agencies to recover outstanding monies.

The figures were released recently by the Credit Services Association (CSA), the trade body for debt collection agencies, who said that the figure grew by £6bn in the second half of the year and that the amount of outstanding debt had been steadily increasing over the past few years.

The CSA said the majority of the debts that were passed across to debt collection agencies were provided by mainstream lenders but utility companies and phone providers were also utilising debt collection services. Furthermore, government departments such as HMRC and the Treasury were also passing outstanding debts to private debt collection agencies. Additionally the CSA confirmed that payday loan companies made up just “a smattering” of those lenders using the 90% of the industry it represents.

A spokesman for the CSA said there had been “a cultural shift” which meant more government agencies were outsourcing debt collection.

President of the Credit Services Association, Sara de Tute, said:

“The economic environment has undoubtedly become more difficult and so it is no surprise that debts are rising.”

“But there are also other reasons, including ‘new’ creditors within the private sector and parts of national government who no longer see an issue with outsourcing debt for collection to professional and highly regulated agencies capable of recovering monies vital to the public purse.”

She added:

“The government has gone on record recently as reporting that overdue debts cost it between £7bn and £8bn – 95% of which resides with the Department of Work and Pensions and HMRC – and part of this has now been passed to our members for collection.”

At the end of 2011, the CSA said its members were handling 32m unpaid debt cases, the equivalent of at least one significant debt for every UK household. Six months previously the figure stood at 28m.

Of the total in debt collectors’ hands in December 2011, £31bn was placed by creditors with debt collection agencies to collect, and a further £27bn was debt owned by debt buyers.

The CSA said debt passed on by lenders tended to be “fresh debt”, which was less than six months old. It said the chance of recovering this debt was high, and often just a letter from the collection agency resulted in it being cleared. In contrast, that bought by companies was often old debt which had been sent out to agencies before and returned to lenders when it remained unrecovered.