Source: CreditandCollectionsWorld.com and SourceMedia, Inc.
The Credit Services Association, a trade group for the debt collection and purchasing industry in the United Kingdom, has forecast that the total amount of delinquent credit outsourced for collection will rise to £22.7 billion (U.S. $46.6 billion) by the end of 2007, and that this figure will increase to between U.S. $49.1 billion and $49.9 billion by the end of 2008.
Estimates from independent consultants suggest that growth in debt sales over the next three to four years is likely to increase by more than 20% each year, based on the fact that the debt mountain may be reaching its peak. Consumers are becoming more cautious about spending via credit and access to credit is becoming increasingly difficult as lenders tighten their underwriting standards. The speed of the newly available debt will also increase, CSA predicts. Over indebtedness will be accelerated by more fixed-rate mortgages becoming variable at higher rates and access to new credit becoming harder.
The rise in the London Interbank Offered Rate (LIBOR) – a daily reference rate based on interest rates at which banks offer to lend unsecured funds to other banks – and the fact that most U.K. lenders have not yet reported losses linked to the U.S. subprime mortgage crisis could exacerbate the situation. CSA warns the real figures may be higher than its estimates. The value of accounts outsourced to collection agencies in the U.K. has been growing exponentially, from $10.7 million in 2000 to $17.6 billion in 2003, and to $43.1 billion in 2006, according to CSA.