Making a profit out of debt – the rise of the modern debt collector

The business of buying and selling debts is set to double over the five years to 2017, according to leading credit ratings agency Standard and Poor’s.   

Debt collectors are expected to be spending £1.5billion a year by then on buying up bad debts from banks and other lenders.

Most people don’t realise that if they are in arrears with their payments, the bank or lender may sell on that debt to a specialist debt collection company. 

In the past, financial institutions collected debts themselves, perhaps using outside agencies to take on some parts of the work.

But now more and more are simply selling off the debts they are finding too difficult to collect.

Why would they do that?  Because the debt collection specialists believe they have more efficient ways of collecting  the debts than the banks – and are prepared to pay the banks for the debts so they can apply their own methods.

Some debts are bought up for as little as 10p in the pound.  But the banks and lenders – which would otherwise have written off the debts as not recoverable – are happy to get at least some return on their money.

Debt collection companies typically buy debts that have been run up on credit cards, personal loans, gas and electricity bills, phones, cars, shop credit and mortgages.  

They have new and highly sophisticated computer systems to help them check details and track debtors – for example, by cross-checking addresses and finding people with whom the banks had lost contact.

They then, according to one major player, “work closely with customers whose debts we acquire to find affordable repayment plans based on their individual circumstances”.

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