This study explores the money-making potential of acquiring and pursuing old unsecured debts in the UK. It delves into the debt market, the operations of debt purchasing companies, and the opportunities for profit through tax benefits and debt collection practices. Here at Johnny Debt we have gathered together some information, so that you will understand what your debt is worth. Remember, your debt can also be worth a lot of money to companies offering debt solutions too.

Debt Collection Market Overview

Debt collection stands as a thriving industry in the UK, with millions of pounds in unsecured debts sold annually by banks, credit card companies, and other lenders to debt collection agencies. These debts, often aged and seemingly unrecoverable, can be acquired at a fraction of their original value.

Key Players in Debt Purchasing

Several prominent companies in the UK specialise in purchasing and collecting on old unsecured debts. Some major players in this field include:

• Intrum UK:
  • Subsidiary of Intrum AB, a Swedish debt collection company. Intrum UK.
  • Deals with unsecured debts, including credit card balances, personal loans, and utility bills
• Arrow Global:
  • UK-based debt management company. Arrow Global.
  • Acquires unsecured debts from various sources, such as banks, credit card companies, and telecommunications companies
• Cabot Financial:
  • Prominent British debt collection agency. Cabot Financial
  • Specialises in recovering old unsecured debts, among the largest debt collectors in the UK
• Debt Recovery Plus:
  • Operates in the UK
  • Purchases aged unsecured debts and is known for assertive debt collection methods
• Zenith Collections:
  • UK-based debt collection agency
  • Focuses on obtaining old unsecured debts from the estates of bankrupt individuals, a major player in this niche
• Lowell Financial:
  • British debt collection company. Lowell Financial.
  • Acquires old unsecured debts from various sources, notable for incorporating technology in the debt collection process
• Provident Personal Credit:
  • UK consumer credit company
  • Engages in purchasing old unsecured debts, recognised for targeting borrowers with lower incomes
• Marston Group:
  • One of the largest debt collectors in the UK. Marston Group.
  • Buys old unsecured debts from a range of sources, contributing to its significant presence in the industry
• Moorcroft Capital:
  • Known for utilising litigation in debt collection. Moorcroft.
  • British debt collection company that acquires old unsecured debts from various sources
• DCS Group:
  • British debt collection company
  • Purchases old unsecured debts from different sources and distinguishes itself through the strategic use of technology in the debt collection process

These companies buy debts in bulk and employ various methods, including phone calls, letters, and legal action, to collect on them. Despite the low purchase price, even a modest success rate in debt collection can yield substantial profits for these entities.

Can debt collection be profitable for companies targeting low-income borrowers?

Yes, debt collection can be very profitable for companies targeting low-income borrowers, as they often purchase old debts at a highly discounted rates and may employ aggressive collection strategies. However, ethical concerns arise regarding the impact of such practices on financially vulnerable individuals.

How Debt Collection Companies Profit through Tax Advantages:

Debt collection companies in the UK can leverage various tax breaks, enhancing their overall profitability. These include:

• Bad Debt Deduction: Allowing companies to deduct un-collectable debt amounts from taxable income, thereby reducing tax liability.
• Legal Fees: Enabling companies to deduct the expenses incurred for legal services in debt collection.
• Collection Agency Fees: Allowing deductions for fees paid to external agencies for debt collection services.
• Travel Expenses: Providing deductions for costs associated with collecting debt, such as travel expenses.

These tax breaks significantly contribute to the financial success of these companies.

Profit Potential for Debt Collection Agencies:

While the success rate in debt collection varies based on the age and type of debt, companies can acquire a substantial debt portfolio at a low cost. Even if a small percentage of debt is successfully collected, it can result in significant profits for the company.

For instance, if a company acquires a portfolio of £1 million in old credit card debt for £100,000 and successfully collects 10% of it, their profit would amount to £90,000.

Conclusion:

Debt collection proves to be a highly lucrative venture for companies in the UK, even concerning seemingly un-collectable debts. By strategically acquiring debt at a low cost, employing diverse collection methods, and benefiting from tax breaks on associated expenses, companies can achieve substantial profit margins. This positions debt collection as a profitable industry in the UK, potentially impacting vulnerable individuals in the process. And now you know why some collection companies are so aggressive! You may also be interested in this post, How Much is My Debt Worth?