Questions are growing about a possible bubble in the debt industry.

[sidley]

Re: Questions are growing about a possible bubble in the debt industry.

The FCA wants new credit card customers to be given the choice on whether to make firms obtain consent for each unsolicited credit increase. And it wants existing card holders to have a straightforward way to decline increases or choose how they will be offered in future.

That's what it should be doing so I wouldn't say the FCA are happy with the way things were.

Yes, but will companies find a way of phrasing or framing it, so that most people won't know it's an option? And why just new customers?

[warwick65]

Re: Questions are growing about a possible bubble in the debt industry.

At the moment I think they offer it to you and if you do not refuse it they just up it anyway. Neo liberalism at its finest

[Amethyst]

Re: Questions are growing about a possible bubble in the debt industry.

Current Vanquis Terms ( so new custs )

well hidden away ....

3. CREDIT LIMITS AND INTEREST RATES

3.1 We will set your Credit Limit when we open your Account and will tell you what it is. Your Credit Limit is the maximum amount that you can borrow and/or spend on your Account. If we reasonably consider it appropriate (e.g., depending on how your Account is run and/or whether your financial circumstances have changed), we may increase or decrease your Credit Limit from time to time and will notify you of any such change. You can tell us if you do not wish to have your credit limit increased or you want it reduced - see paragraphs 11.11 and 11.12.

11.11 You may request an increase in your Credit Limit at any time but we are not obliged to grant it in full or in part. We will give you not less than 30 days' notice if we propose to increase your Credit Limit without your having requested it. You can reject this increase. We will tell you how you can do this when we give you notice.

11.12 You can tell us at any time that you do not wish to receive Credit Limit increases and you can ask us to reduce your Credit Limit. We reserve the right not to make any reduction to your Credit Limit that you may request or defer its making where we have a reasonable belief that such reduction would cause you to commit a breach of this agreement e.g., you would exceed the requested Credit Limit.

I think the proposals really should be to add a opt in/out box to the agreement so you can opt out of credit increases at the time of application ( be interesting if many people ticked that box lol ) - more useful would be that if an increase IS proposed you have to take action to actually have the increase applied ( rather than take action to decline ).

[sidley]

Re: Questions are growing about a possible bubble in the debt industry.

I think the proposals really should be to add a opt in/out box to the agreement so you can opt out of credit increases at the time of application ( be interesting if many people ticked that box lol ) - more useful would be that if an increase IS proposed you have to take action to actually have the increase applied ( rather than take action to decline ).

I agree Amethyst, the usual line with offers " if you do nothing you'll get it anyway" rather than having to take action. Perhaps a phone call to the Bank/Credit Card company to activate an increase, where they can assess your ability to shoulder an increased debt.
@warwick65

I wonder if we will now see a flurry of claims particularly against homeowners followed by charging orders . Once these have been obtained the debts become more tangible and a more guaranteed source of income.

Equally even non non homeowners who are in work with attachment of earnings orders . Interesting times ahead to add to the train wreck we are already heading for

Reading the articles it seems that the financial world are worried about how much it is going to cost to collect these debts (ie those who don't voluntarily come to some kind of payment plan) thru the courts. Esp. with the new PAPs in place.

[thedirtyhound]

Re: Questions are growing about a possible bubble in the debt industry.

I wonder if we will now see a flurry of claims particularly against homeowners followed by charging orders . Once these have been obtained the debts become more tangible and a more guaranteed source of income.

Equally even non non homeowners who are in work with attachment of earnings orders . Interesting times ahead to add to the train wreck we are already heading for

You may be right on this, but if they have to go down the route of charging orders, etc, it greatly bumps up the costs for them and it may be years before they get any money. The additional costs will add to their cash flow problems in my view, certainly in the short term.

[warwick65]

Re: Questions are growing about a possible bubble in the debt industry.

Charging orders or at least ccjs with enforcement are tangible assets that guarantee ROI for potential investors.

I think there is trouble ahead

[Guest]

Re: Questions are growing about a possible bubble in the debt industry.

[QUOTE=warwick65;763580]Charging orders or at least ccjs with enforcement are tangible assets that guarantee ROI for potential investors.

I think there is trouble ahead[/QUOTE]
I suspect that many lenders such as Cabot will shore up their loan portfolio by sticking mainly to loans where a ccj with a possible charging order.

[thedirtyhound]

Re: Questions are growing about a possible bubble in the debt industry.

I do not think there is any need for such pessimism.

Assuming the facts in the article are correct (a dangerous assumption perhaps for the British press!) it says that Cabot had obtained 200,000 judgments in its first 20 years until 2014, yet by June 2016 this figure had risen to over 500,000. So they obtained 300,000 judgments in around two years six months.

That is exactly their problem. How many of those have actually been paid? Getting the judgments is one thing, but getting the money is another. Courts will let people pay in dribs and drabs, if they pay at all. Scenarios where people pay just £10.00 per month are quite common and it can take years to pay back some debts.

Lets look on the dark side. Lets say that nobody who Cabot got a judgment against in the last 30 months pays them and they have to go down the route of charging orders, where will that get them? They will have to spend a fortune on legal costs. How many charging orders can the clogged up court system process in a single day? Then what about enforcement? Can you honestly see 300,000 people being turfed out onto the street? If they had no money, it would become the government's responsibility to house them, in which case there would be a rapid change of law.

The debt purchase industry exists because lenders want someone else to do their dirty washing. Obviously, when a debt is sold to a debt purchase company, the bank has already written it off and sold it for a token amount. However, they don't want to offer the same discount direct to the customer because they know that people would borrow from them in the knowledge that they could default and get away without paying most of it back.

The debt purchase industry exists purely to continue to punish individuals who don't pay money back to lenders. Once debts have been sold, the original lender gains absolutely no further benefit. All the money paid to DPCs goes to line their company profits, it doesn't go back into the banking system.

I'm sure that in the coming months we will see laws passed about the level of unsecured credit that people can incur. I think we may also see caps on interest limits, like there are in many Eurpean countries. What justification is there for cards that charge 39.9% APR or in one case that I saw recently 59.9% APR.

The opportunities for DPCs will diminish rapidly in the years ahead. In the meantime, if everybody contacted by these companies put them to as much work as possible and messed them round as much as possible, one by one they will start to go bust. That includes some of the big ones.

For all the bullshit hype about growth and revenue streams, the industry has finally been rumbled. It is heading for junk bond status and then the scrap heap!

[sidley]

Re: Questions are growing about a possible bubble in the debt industry.

thedirtyhound,

Here is a snapshot from their press release, on their corporate website about how they have been doing.

Over £21 billion face value debts purchased in last 19 years for £2.1 billion. So, just below 10% of the value of the debt. But in 19 years they have collected £2.9 billion minus purchase costs gives them £800 million over 19 years. Or approx. £42 million per year, take off running costs ( wages* etc) doesn't leave them with much profit, if any.

Their forecast (pinch of salt needed here) is £2.2 billion over the next 10 years, but only an increase of £0.3 billion the 5 years after that. (if I'm reading things correctly)

*wages - somewhere I read in the papers about their flotation, that they employ 1,500 staff in UK. If you assume the annual average salary to be about £25,000 (some less, some such as solicitors, litigators, managers, etc higher) that amounts to a wage bill of approx. £37,500,000 p.a. (not inc. NI pensions and so forth).

Cabot's projection for the next 10 years in receivables is approx £220 million p.a. but as in many articles the financial world thinks that they have already picked the lowest hanging fruit. Getting the rest to pay is costly and near impossible.

Scan through the papers and in the last few months all the big players ( Cabot, Lowell, Link) have all made takeovers of other companies. I wonder why?

1. Cabot Credit Management (www.cabotcm.com)

Cabot is one of the largest credit management services providers in Europe and the market leader in the UK and Ireland (based on 120 month estimated remaining collections as of 31 December 2016). Cabot provides a range of credit management services across a broad client base that includes some of the largest credit providers in Europe. These services include debt servicing offerings such as early stage collections, business process outsourcing, contingent collections, trace services and litigation activities Cabot has credit management experience across a range of both credit providers (including consumer finance, telecommunications companies, retailers, utilities companies and government agencies) and asset classes (including secured consumer debt, small and medium sized enterprise debt, and high value accounts).
Between Cabot’s inception in 1998 to 30 June 2017, it has invested a combined total of £2.1 billion in the acquisition of over £21 billion in face value of purchased loan portfolios and has received £2.9 billion in cumulative collections from purchased loan portfolios. As at 30 June 2017, Cabot’s 120month estimated remaining collections was £2.2 billion, and Cabot’s 180-month estimated remaining collections was £2.5 billion.
With 20 years of debt purchase and debt servicing experience, Cabot was one of the first companies to engage in the credit management services market in the United Kingdom. In March 2016, Cabot became the first large credit management service company in the United Kingdom to be authorised by the FCA, and in May 2017 Cabot became the first credit management service company in Ireland to be authorised by the Central Bank of Ireland.

[warwick65]

Re: Questions are growing about a possible bubble in the debt industry.

I think you have made some huge assumptions in your calculations there sidley

You are assuming that all 1500 staff are full time which is likely to be very far from reality
You have also assumed all purchases and earnings are linear which again will be far from the truth- the purchase of the Hillsden group will have added significant revenue and costs to the operation

If you look at the quaterly reports for this year they do seem quite healthy

They have relatively recently bought a chunk of RBS debt , now i don't know if that was performing or not . equally i have no idea of the price paid or the terms of the assignment

Remember as well that while forums such as this, AAD and Cag see significant victories over the likes of cabot lowell etc, the vast majority of court claims go undefended and end up in default jusdgments

You also ask why many debt purchasers have made acquisitions, that is the nature of capitalism , rationalisation etc. A greater number of assets held by a fewer number of organisations . Profit is not extracted but reinvested into the business although if you follow the principles of capitalism there will come a time when efficiency savings become smaller and smaller.


I do hope that they fail but I can not see it in time to save many people

[EXC]

Re: Questions are growing about a possible bubble in the debt industry.

Many debt collectors such as Lowell and Cabot Credit Management, which pulled its initial public offering last week, have been developing their own in-house legal services. In a prospectus for a 2016 Cabot debt sale, it said that in the 20 years to 2014 it had obtained about 200,000 judgments. By the end of June last year the figure had risen to more than half a million. The rise was mostly driven by Cabot’s purchase of Marlin, a specialist law firm.

http://legalbeagles.info/forums/show...771#post763771

[thedirtyhound]

Re: Questions are growing about a possible bubble in the debt industry.

I think you have made some huge assumptions in your calculations there sidley

You are assuming that all 1500 staff are full time which is likely to be very far from reality
You have also assumed all purchases and earnings are linear which again will be far from the truth- the purchase of the Hillsden group will have added significant revenue and costs to the operation

If you look at the quaterly reports for this year they do seem quite healthy

They have relatively recently bought a chunk of RBS debt , now i don't know if that was performing or not . equally i have no idea of the price paid or the terms of the assignment

Remember as well that while forums such as this, AAD and Cag see significant victories over the likes of cabot lowell etc, the vast majority of court claims go undefended and end up in default jusdgments

You also ask why many debt purchasers have made acquisitions, that is the nature of capitalism , rationalisation etc. A greater number of assets held by a fewer number of organisations . Profit is not extracted but reinvested into the business although if you follow the principles of capitalism there will come a time when efficiency savings become smaller and smaller.


I do hope that they fail but I can not see it in time to save many people

The accounts might look "healthy", but the failure of the Cabot floatation raises serious questions as to the long term viability of that business. One wonders if there is a little "massaging" of figures to make them look better than they really are? If you recall, that is exactly what a number of senior Tesco executives were caught doing and they are now facing criminal charges.

[sidley]

Re: Questions are growing about a possible bubble in the debt industry.

@ Warwick,

Thanks for the explanation, you may have guessed that I am not blessed with much business acumen. Possibly that is why I'm poor and not a stinking rich person!

[sidley]

Re: Questions are growing about a possible bubble in the debt industry.

Exactly dirtyhound, in the run up to the Financial Fiasco, 10 years ago, banks, hedge funds, etc. were all making acquisitions of dodgy small companies as a way of hiding their huge losses they were making from non-performing loan portfolios. This only works in the short term.

[warwick65]

Re: Questions are growing about a possible bubble in the debt industry.

@ Warwick,

Thanks for the explanation, you may have guessed that I am not blessed with much business acumen. Possibly that is why I'm poor and not a stinking rich person!

Hi Sidley
The explanations I subscribe to are less business acumen and more sociologically based explanations of capitalism. I too am not filthy rich and get by day by day

I think anyone who works for a large company will see the spending squeeze towards the end of the financial year. Many years ago I worked for a supermarket that was owned by private equity firms, for the two years before the 'floatation' during the last couple of months before the end of the financial year they put blocks on all stationery and uniform orders - it helped inflate the P&L bottom line

Prior to that i had worked for a restaurant chain and one year we had a massively successful December followed by the worst january imaginable- not because sales were down but we had squeezed all possible profit from the December results, delayed paying bills and fixing equipment because we were under so much pressure to put in good results.