Who wants to be a (debt) millionaire?

Debt collection is one of those industries that no-one ever thinks about - until of course you miss repayments and suddenly they are on the phone.  Who are they?  How do they operate? Who runs them? Do they make a profit?

The answer to the last question is – many of them do, and handsomely in some cases.

It has recently been reported that one debt collection company – which, in time honoured fashion, was set up in a living room just 12 years ago – has just been sold in a £295million deal, which will net the founder £30million.

He’s now off to climb Mt Kilimanjaro (like you do), but what of the business sector that made his fortune?

Debt collection agencies are commercial businesses like any other.  They make their money from contracts with organisations that offer credit to customers (such as banks, car loan companies and, increasingly, local councils) and from the fees they charge people from whom they collect debts. 

Some debt collection companies buy up entire “books” of debt and then use highly sophisticated computer systems to, for example, track down debtors with whom the original creditor has lost touch, or employ equally modern digital management systems to chase up debts more efficiently.  They then, to quote a leading player, “work closely with customers whose debts we acquire to find affordable repayment plans based on their individual circumstances.”

As we have discussed here before, if you are in debt it’s crucial to understand the difference between a debt collector and a bailiff. 

All a debt collector can do is ask you to pay what you owe, offer easier terms if you are struggling, or ultimately take you to court – which will involve formal letters and court hearings.

Bailiffs have very specific powers which can be used ultimately to take some (but by no means all) of your possessions and sell them to pay off your debts.  But the rules under which they work are strict, and, very importantly, in most circumstances they cannot break into your house if you do not let them in.  (Click here for information on what bailiffs can and cannot do.)

But the fact that a debt collector does not have legal powers does not mean that they cannot put pressure on you.  While some have good codes of conduct, others will harass and bully debtors.  Mobile phones have in some ways made their job easier – you are vulnerable not just to calls but to emails and text messages at all hours of the day (and night, if the operators are based overseas).

Meanwhile, the debt collection industry is consolidating, with companies merging to justify the investment required in these efficient but costly computer systems. Hence the occasional debt millionaire...

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