Collections and Debt Management in UK Personal Lending

Transcription

1 Brochure More information from Collections and Debt Management in UK Personal Lending Description: The current economic downturn is forcing many banks to rethink their debt management and collections strategies as more individuals become unemployed and unable to repay their loans. Scope - Analyzes the current personal loan market performance and provides forward looking estimates for the non-standard population up to Assesses the process of debt management and recovery and provides analysis on how it can be enhanced throughout the current climate. Highlights of this title Generally, financial institutions do not invest in debt collection activity until there is an economic downturn. Devoting resources towards improving debt recovery generates an income stream that would otherwise be lost. The single biggest obstacle for any bank offering a personal loan is assessing the likelihood of a potential default. To help eliminate this problem there needs to be a more rigorous lending criteria and a greater degree of customer data sharing. Banks are offering advice on budgeting and financial maintenance to help reduce the threat of delinquency, especially for individuals in difficult situations. Key reasons to purchase this title - Sizes and forecasts the non-standard population as well as providing historical data for the personal lending market in the UK. - Describes in detail the process of debt recovery for borrowers who have fallen into repayment difficulties. - Offers insight and recommendations for enhancing debt management and recovery strategies. Contents: CATALYST 1 SUMMARY 1 ANALYSIS 2 The personal loan market is bracing itself for rising impairments 2 Personal loan balances have grown partially due to higher default rates 2 Personal loan balances have grown while advances have fallen over the past 18 months 3 Arrears and delinquency rates will continue to rise during the recession 4 Impairment provisions will continue to grow as banks adapt to the worsening economic climate 4 Greater levels of lending in 2007 led to higher provisions for bad debt 4 As a percentage of total lending only a handful of lenders have increased their loan provisions 5 Most lenders will have increased their impairment provisions for Growing unemployment will result in a larger non-standard population adversely affecting impairments 6 Datamonitor predict that the non-standard population will rise to just over nine million by the year Prevention of bad debts is better than the cure in the current climate 9 Most banks have similar methods for debt recovery and collection 9 Determining customer intentions is crucial for future loan portfolio performance 9

2 Data sharing can reduce fraud 10 Stringent lending policies are often the best way to minimize potential defaults 10 Affordability measures offer a better assessment of a borrowers financial status 11 Inter-bank data sharing minimizes the risk of lending to new customers by reducing informational asymmetries 11 Financial advice could be one way to prevent borrowers from falling into delinquency 12 Lloyds TSB have further led the way for customer advice 13 In-branch financial advice is becoming more popular as consumers become increasingly worried about their debts 14 A delinquency needs to be identified and resolved as soon as possible 14 Quick identification of arrears and delinquency is the most important aspect of debt management 15 Experians Tallyman is an advanced system that streamlines debt collection and recovery 15 Customer segmentation is vitally important in order to maximize debt recovery 16 First time impaired need to be nurtured by the bank to ensure a successful debt collection procedure 16 There are three main solutions for borrowers who fall into repayment difficulties 16 Debt management plans are suited to those with relatively low levels of debt 16 Alternatively, IVAs offer a solution for an individual faced with overwhelming debts from various creditors 17 Often bankruptcies are used as the last resort for those who are severely impaired 17 Third party debt collection agencies are used once all other options are exhausted 17 Growing pressure to treat customers fairly is an important consideration for DCAs 18 Secured personal loans eliminate any confusion as to what should happen should a borrower default 18 APPENDIX 19 Supplementary data 19 Definitions 21 Arrearage 21 Balances outstanding 21 CCJs 21 Delinquency 21 Gross advances 21 Impairment charge 21 Impairment provision 22 Non-standard 22 Secured personal loan 22 Unsecured personal loan 22 Methodology 22 Sizing methodology for the UK non-standard population 22 An element of subjectivity is needed with any definition of non-standard 23 Reasons for credit rejection 24 Elimination of double counting 25 Datamonitor uses seven steps to size the UK non-standard population 25 Step 1: The number of people in the UK of working age 25 Step 2: Absence of a bank account 25 Step 3: Unemployment 25 Step 4: Income support claimants 25 Step 5: County Court Judgments 26 Step 6: Mortgage arrears and repossessions 26 Step 7: Self-employment with less than three years proof of income 27 Bankrupts are excluded because of double counting 27 Further reading 27 Ask the analyst 28 Disclaimer 28 List of Tables Table 1: Loan impairment provisions for the main high street banks, Table 2: Personal loan gross advances and balances outstanding, January 2007-September Table 3: Loan provisions as a percentage of total lending, Table 4: The non-standard population, Table 5: UK non-standard population forecast under the Datamonitor view, f 21 List of Figures Figure 1: Unsecured personal loan advances have been falling while balances outstanding have grown, January 2007-September

3 Figure 2: Only a few lenders increased their proportion of total loan provisions for impairments, Figure 3: 2008 witnessed a massive growth in the number of non-standard individuals, Figure 4: Under the Datamonitor view the non-standard population will increase significantly over the next five years, f 8 Figure 5: Every bank aims to resolve a bad debt as quickly and effectively as possible, Figure 6: Lloyds TSBs budget calculator aggregates all outgoings thus providing a realistic budget representation for any consumer, Figure 7: Datamonitors definition of non-standard 23 Figure 8: A certain degree of subjectivity is needed in a definition of the non-standard population because some lenders are inevitably willing to accept greater risk than others 24 Ordering: Order Online - Order by Fax - using the form below Order by Post - print the order form below and send to Research and Markets, Guinness Centre, Taylors Lane, Dublin 8,

4 Page 1 of 2 Fax Order Form To place an order via fax simply print this form, fill in the information below and fax the completed form to (from USA) or (from Rest of World). If you have any questions please visit Order Information Please verify that the product information is correct and select the format(s) you require. Product Name: Web Address: Office Code: Collections and Debt Management in UK Personal Lending SC Product Formats Please select the product formats and quantity you require: Quantity Hard Copy: Electronic (PDF) - Single User: Electronic - Enterprisewide: USD USD 56 Shipping/Handling USD 2795 USD 6988 * Shipping/Handling is only charged once per order. Contact Information Please enter all the information below in BLOCK CAPITALS Title: Mr Mrs Dr Miss Ms Prof First Name: Last Name: Address: * Job Title: Organisation: Address: City: Postal / Zip Code: Country: Phone Number: Fax Number: * Please refrain from using free accounts when ordering (e.g. Yahoo, Hotmail, AOL)

5 Page 2 of 2 Payment Information Please indicate the payment method you would like to use by selecting the appropriate box. Pay by credit card: You will receive an with a link to a secure webpage to enter your credit card details. Pay by check: Please post the check, accompanied by this form, to: Research and Markets, Guinness Center, Taylors Lane, Dublin 8, Pay by wire transfer: Please transfer funds to: Account number Sort code Swift code IBAN number Bank Address ULSBIE2D IE78ULSB Ulster Bank, Main Street, Blackrock, Co. Dublin, If you have a Marketing Code please enter it below: Marketing Code: Please note that by ordering from Research and Markets you are agreeing to our Terms and Conditions at Please fax this form to: (646) or (646) From USA or From Rest of World