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The Credit Services Association (CSA)
Plus ça change? - DGI data, Q3 2014
Do the latest statistics from the Credit Services Association’s Data Gathering Initiative show that consumers are more in charge of their finances? CSA Vice President, John Ricketts considers.
We are told there are lies, damned lies and statistics, the inference being that statistics enable you to argue a point that might otherwise be lost without bending the truth.
But there are occasions when statistics are most useful to help educate and inform, and this has been the driving principal behind a dedicated Data Gathering Initiative (DGI) from the Credit Services Association (CSA) that has allowed some interesting comparisons to be drawn over the 12 months (June 2013 – June 2014).
Perhaps the most keenly sought-after statistic is the total value of consumer debt held by CSA members which has remained static over the 12 months at £67bn. This status quo contrasts sharply with the increase in the volume of debts – up from 47m to 54m – an increase of 15% and the significant reduction in the average balance of 13% from £1,433 to £1,250.
Debt active in the collection process has also risen only slightly in the 12 months from £49 billion to £51 billion. This modest 4% rise again contrasts sharply with the increase in the volume of debts – from 34.5 million to 41 million – an increase of 19% and the significant reduction in the average balance of 11% from £1,407 to £1,250.
These figures are interesting for several reasons, not least because they suggest that we might be seeing a higher number of lower-value borrowing beginning to feed into the collections cycle. They are interesting also in the context of an excitable media keen to report consumers spiraling into debt when the figures suggest otherwise. Indeed it might even be argued that the figures show that consumers are more in control of their debts than they have ever been before.
The DGI explores not just the totals for debt in the collections process, but also the specifics as regards movements and trends within the debt purchase sector. The amount of debt owned by buyers as at June 2014 shows an increase of 18% from £45 billion to £53 billion, and the volume has also increased commensurately at 20% from 32 million to 38.5 million, with £3bn less dormant debt being “warehoused” by the buyers. Given that purchased debt tends to be dominated by the financial services sector, this would imply that the overall balance reduction is perhaps not in regulated debt.
This growth in the Debt Purchase market does not seem to be being shared with the debt collection agencies (DCAs) as the value and volume outsourced by debt buyers to DCAs has remained static year-on-year. There might be several reasons for this, and the most likely is that debt buyers are changing their model, taking the higher balance financial services debt out of reach of DCAs and collecting more in house. Certainly DCAs are being impacted, but then any shortfall appears to be being made up for in different areas, with the most popular target being the growing volumes of lower value Government debt.
The value of debt with DCAs for contingency commission collection has fallen by nearly a quarter (23%) from £37.5 billion to £29 billion. However, the volume has remained static at 24 million, and the average balance has dropped from £1,553 to £1,200 – a fall (similarly) of 23%. Again this might put paid to the suggestion that consumer debt is in any way ‘out of control’ and may support the earlier statement that customers are becoming better at managing their financial affairs.
DGI Data Q 3 3 2014 In addition to the financial data collected, the DGI – which uses data gathered from over 400 CSA Members by the professional services firm PricewaterhouseCoopers (PwC) – also provides facts and figures regarding operational issues such as recruitment. It separates out those individuals who have a ‘revenue generating’ role (ie collectors) and those that do not. To this end it is remarkable – in the true sense of the word – not just that the industry employs some nett 500 more staff than it did in June 2013, but that the number in non-revenue generating roles has increased by 673! Although these roles are not specified, it would be reasonable to assume that a large proportion are in the area of compliance, thus highlighting one of the greatest cost challenges to agencies and buyers to stem from the new FCA regime.
Such facts, figures and commentary can only ever provide hints and suggestions at what is going on in such a hugely important industry as debt collection. But being able to compare figures over 12 months allows our commentary to have greater validity. It will be interesting to see how these figures change in subsequent quarters.