A new report describes how the consumer collection and debt purchase market segments in the United Kingdom have fared during the economic downturn finding, among other things, that while outsourcing debts is well established in the private sector, the public sector is seen to be a key area of growth.
Debt purchasing was hit hard by the credit crunch in 2008, with both sellers of portfolios and the capital to buy them being in short supply. But the market has returned to growth with both volumes purchased and prices paid increasing strongly in the last couple of years.
Collection agencies were boosted by an increase in consumer borrowing over the last decade, but hampered by a difficult collections environment experienced in the prolonged economic downturn.
The report by Apex Insight shows there is great overlap between the two segments. Many of the larger collection agencies also have purchased portfolios of debts in recent years while several debt purchasers have carried out collections on a contingent basis. Apex Insight is an independent provider of research, analysis and consulting services covering consumer credit and other markets in the UK and Europe.
Provision remains relatively fragmented with several hundred collections agencies and more than 60 buyers believed to have purchased debt portfolios. The largest agencies include independent players such as Wescot and Moorcroft as well as BPO providers such as Capita and Arvato both of which have recently made acquisitions in the area while the biggest debt purchasers are Cabot, Lowell, Arrow Global, CapQuest, Marlin, Link, Max Recovery and 1st Credit.
There has been significant acquisition activity, from private equity and from corporate acquirers looking to diversify internationally or add to their range of service offerings. There also have been substantial fundraising exercises including four high-yield bond issues in 2012 and 2013. Further such transactions are likely and there is also industry expectation that one or more of the larger debt purchase players will seek a full stock market listing in the future.
The studys forecast, which analyzes historical relationships between key drivers and variables and incorporates findings from interviews with key market players, sets out how Apex Insight expects the market to develop. It takes into account areas of uncertainty such as how slow economic recovery with continued high unemployment may lead to consumers reducing borrowing levels further with less debt for sale and a continued poor collection environment and market expectation of a correction in debt prices.
The full report: UK Consumer Debt Purchase and Debt Collection: Market Insight, which includes findings from interviews, profiles of the larger players as well as an assessment of trends and forecasts for future growth, is available for purchase at: apex-insight.com/consumer-credit.