The Wall Street Journal today is running a feature article on the trouble some European debt collection agencies are having chasing after accounts. Like everywhere else in the world, the economy and tightening regulations are making the ARM business less profitable.
But the article, “For Europe’s Debt Collectors, More Work Isn’t Paying Off,” focuses mainly on the experience several Italian and Spanish collection agencies. It does not explore the rapid expansion and growing revenues of ARM firms based in the UK and Scandinavian countries.
Still, the severe economic issues seen in Southern Europe continue to spread to other parts of the continent. The problems seen now in these countries could be heading to different markets, including the U.S.
Combined with persistently high unemployment and soaring bad debt writeoffs, countries in Southern Europe face legal and regulatory hurdles not seen in many other markets with mature ARM operations.
For example, the piece notes that the legal collection channel is tough to negotiate in Italy, Spain, and Greece:
According to the World Bank, it takes 1,210 days on average to resolve a court dispute in Italy, while many cases drag on for a decade, lawyers say. In Spain and Greece it takes 510 and 819 days, respectively, compared with 370 in the U.S.
While there is plenty of debt to be worked and revenues have been growing, the debt collection industry in those countries is having an issue with profitability. In order to chase payments, collection agencies must employ more people and use expensive tactics, like specialized training.
While there are currently legislative fixes proposed, like one to streamline the civil case process in Italy, many in the industry feel that will not improve the situation much as consumers just don’t have the money to pay debts right now.