Debt purchase market value hits £848 million

The UK debt purchase industry almost returned to its 2011 peak as the value of the market hit £848 million, a new report has found.

The market peaked at £867 million in 2008 before falling away in 2009 as the credit crunch caused sellers and buyers alike to retrench.

But last year marked a turnaround for the industry as lenders put more portfolios up for sale and the collections environment improved, causing the value of the market to return to almost pre-crisis levels.

These were some of the key findings of a report on consumer debt purchase by Apex Insight, which has taken an in-depth review of the consumer debt purchase industry and evaluated some of its key players.

Its findings on market value are based on factors including the amount of unsecured consumer borrowing, the level of discount applied to portfolios at the sale stage, and how much debt is collected after being sold.

The report identifies a trend of growing consumer borrowing leading up to 2008, which in turn led to a rise in outstanding debt levels.

This growth effectively halted in 2008 as the economy stuttered, causing more consumers to repay debts which in turn made it difficult for many debt purchasers to secure funding to buy portfolios, as risk appetite dried up among lenders.

But the report also highlights two trends which have contributed to the recovery of the market.

The first trend is a higher number of sellers from different sectors entering the market, for example utility firms and local authorities, broadening the types of debt up for sale.

The second is debt being sold earlier in the cycle and thus driving a higher price, in contrast to the earlier days of the market when debt was almost always sold at a low value after several recovery attempts.

The report has also identified Cabot Credit Management, Link Financial, CapQuest, 1stCredit, Lowell Group and Max Recovery as the six leading debt purchasers in the UK, while acknowledging “several other significant players” in other areas such as outsourced debt collection.