Bad Time For Some, Others Cash In
Investment banks are laying employees off by the hundreds, developers are freezing projects and oil firms are lining up to receive government aid. At some companies, however, business has never been better.
“We’re seeing at least three to four times more cases lately,” said Nikolai Ivanov, the deputy director of USB Credit Collection Agency. “We were getting around 1,000 to 2,000 credit portfolios turned over to us monthly. In the last few months, it’s been more like 6,000 to 8,000.”
The company, which according to its web site “creates an atmosphere of maximum discomfort and tension around debtors … forcing them to speedily return their money,” is used by banks to search out clients who are lagging behind on payments and convince them to settle their obligations. In October alone, USB received $80 million in debts for collection — a record, Ivanov said.
Credit collectors, lawyers, business schools and even fast food companies are among those that are seeing the crisis as a once-in-a-lifetime opportunity. In Ivanov’s case, it is a chance to profit from delinquent debtors, some of whom stretched themselves thin during boom times and gave no thought to what would happen if things turned around.
A typical delinquent debtor, Ivanov said, is younger than 30 and in debt because “their desires did not correspond to their financial capabilities.”
“They go into debt because of their stupidity,” he said. “They borrow money thinking they can handle it, then something happens in their lives, or the economy changes, and they start missing payments, and the charges start piling up.”
Other debtors are older and become delinquent because of a major life change, such as a layoff or divorce.
While the financial crisis has not yet produced a significant increase in the amount of delinquent debtors, Ivanov said it has affected the amount of time that banks now wait before turning to a collection agency.
“Banks used to spend months looking for these people on their own before turning them over to us,” he said. “Now they do it much sooner, sometimes as quickly as 10 days after a missed payment.
“Bank-to-bank lending is low, and they need the cash.”
Ivanov said the amount of unpaid debts by private individuals would eventually ebb because banks have begun lending more selectively and demanding more collateral for loans. However, he predicted a looming credit collection boom tied to corporations unable to meet their debts.
“Next year will be a golden year for credit agencies,” he said. “We’ve seen a huge jump in corporate debt collection, especially from European clients trying to collect from Russian corporations.” Full article.
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