Boom time for Debt Collection Agencies purchasing bad debt

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Debt Collection Agencies in the UK are purchasing bad debt for as little as 10p for every single pounds worth of debt they buy according to new reports.

Leading credit rating agency Standard & Poor’s has estimated that Debt Collection firms will spend as much as £1.5 billion a year buying bad debts from financial institutes, almost doubling their business over five years.

Spending on bad debts in 2012 was circa 800m and this is expected to rise to 1.5Bn by 2017.

The significant increase demonstrates rising debt levels and defaults by borrowers in addition to the growing use of debt collection agencies by lenders who simply want to shift debts for loans that are providing difficult to collect.

Historically, Banks and other financial lenders would have sought to recover debts via internal resources with the use of Debt Collection Agencies at a minimum. How, some lenders are just off loading portfolios of accounts in their entirety so they can reduce the size of their bank balance sheets as it generates an immediate return however minimal.

With household debt currently standing at £1.4 trillion, excluding student loans, this trend is set to continue with the government now looking to sell off thousands of  student loans too over the next few years.

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