TDX Group

Creditors in hostile collections environment

Credit Today
06 November 2008

The conditions affecting debt collection have worsened significantly, according to debt management specialist TDX Group.

In the groups quarterly debt index it reported the biggest ever deterioration in the macro conditions affecting creditors ability to collect debts since it started tracking conditions in 2002.

The index has increased by 12 per cent between the second and third quarters as consumers struggle to repay. A rise in the index reveals that the environment for creditors to collect their debt has worsened, whereas a fall means it should be easier. Since 2002, the index has risen by 48 per cent.

The biggest factor accounting for the rise in the index in the last quarter comes from the delinquency indicators, which underline the increasing difficulty experienced by consumers in repaying their debts. There has also been a 41 per cent increase in the mortgage repossession rate, while total individual insolvencies have increased by eight per cent.

In addition, TDX said individual voluntary arrangements (IVAs) have grown by 7 per cent, reversing the recent trend of decline.

As well as delinquency rates, the TDX wealth and cost of living indicators have worsened, with consumers able to save less. Meanwhile, the value of secured properties has also dropped by four per cent in the last quarter to their lowest level since the start of 2007.

However, more positively, both secured and unsecured debt levels have reduced by just over one per cent as creditors tighten their lending criteria.

Mark Onyett, chief executive of TDX, said: 'Although our index had suggested that conditions for creditors had improved slightly over the past two quarters, with this latest update we see that the environment has become increasingly hostile. Given the precarious state of the economy, there is huge pressure on creditors to manage the risk of a significant increase in default levels.'