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Recent research sponsored by business process outsourcing company Firstsource
indicates that the credit crunch has not yet had a major impact on the consumer
debt management industry.
Over a quarter of respondents said they had not been affected by the declining
economic environment, and over half reported that they had monitored only
minimal impact.
The poll covered nearly 1,000 consumer debt managers of companies in the
financial services, telecommunications, retail, and utility industries.
But although debt managers say they have not yet been significantly affected by
the credit crunch, the research showed signs that consumers are starting to take
longer to pay their bills, and that write-offs of consumer debt are increasing.
In addition, 27% of respondents said that some consumers are delaying payment of
bills by up to three months, and 22% cent of debt managers reported that they
had increased their write offs of customer debt in the last 12 months.
In response to the uncertain economic outlook, debt managers expect to outsource
more work to specialist collections and recovery agencies to increase their
collections levels, reduce defaults, and lower their costs.
Over two thirds of debt managers said they planned to increase their use of
outsourcing within the next year; 27% said they would outsource more within the
UK, 18% reported they would collect more from offshore, and 23% expect to
outsource more both within the UK and offshore.
Matthew Vallance, Firstsource’s President, commented: “Although most consumer
debt managers report that they haven’t been rocked by the credit crisis, the
trend amongst consumers is towards later payments which will consequently affect
cash flow.
"Therefore debt managers are looking to specialist consumer debt collections and
recoveries outsourcers in the UK and offshore that have the expertise and
resources to collect more debt, in faster time frames and at lower cost than is
possible in-house.”
Most of the collections work that has been outsourced to date is debt collection
(35% of respondents), tracing (identifying and prioritising debtors to contact,
25%) and legal collections (24%).
The majority of outsourced collections relates to early stage work (debt that is
one to 60 days old, 42% of respondents), followed by recoveries (six months,
26%), late stage (90 to 180 days, 21%), then mid stage (60 to 90 days, 10%).
Respondents said that there were many areas where they could see obvious room
for improvement in their collections strategies. The main failings relate to
poor use of technology.
Over half of debt managers said greater use of online payment systems would
improve their collections levels.
Many managers also felt that they should make more use of interactive messaging
and interactive voice recognition systems.
Source: Getting Paid
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