Doom and boom
Sunday 16 August 1998
If a recession comes, it will increase corporate and consumer debt, and with them, the volume of work that debt-collection agencies face.
But that doesn't neccesarily translate into better profits for agencies. A recession can prove to be a tough time for them as well because they only get paid for debts they recover.
While the number of debts will increase if the country slips into negative growth, the proportion of debt that the agencies will be able to collect will fall.
"Initially you would think that somebody sitting in my chair would be rubbing his hands together, waiting for a recession, but it's actually not that way," said Leigh Berkley, chief executive of Tarlo Lyons Debt Recovery Services, which pursues debts for financial institutions.
"The volumes may go way up, but there will be more people out there simply saying to us: 'Well, do what you like; it doesn't matter if you put me on a rack, I cannot afford to pay.' "
He adds that there will also be more "gone-aways" - debtors who disappear - in a recession.
Tarlo Lyons says it is already experiencing "a substantial increase in demand," with the amount of debt that's come in from clients in terms of value up 31 per cent for the year to June .
Mr Berkley says the debt- collection department of at least one high- street bank is already experiencing an increase in work stemming from indebted customers.
He says the bank has also noted an increase in calls from the Consumer Credit Counselling Service and the Citizens Advice Bureau, adding: "What that means to them [the bank] is that there are more people getting into genuine financial trouble."
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