Going over the books
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Tuesday, 18 September, 2001 - 22:00
SALES of distressed ledger books to debt collection agencies have surged as corporations realise the benefit of offloading the collecting of bad debt.
According to Australian Collectors Association national president David Cains, debt collection agencies pay between as little as one and 10 cents for every dollar of debt they purchase.
Outsourcing the account depart-ment is also gaining popularity.
“Collecting debt is dead, the future lies with account receivables,” Mr Cains said.
Selling the ledger books differs from the practice of factoring which occurs when firms use the book “asset” to receive a line of credit.
When selling the book “asset” the debt collector actually owns the ledger and can pursue the debtors to recoup their money. In some cases the debt collector can recover 60 cents or more in the dollar, depending on how much the ledger book had already been “worked over” by the seller of the ledger book.
Mr Cains said it was a huge industry in the United States, while in Australia banks and other large institutions were only just starting to wake up to the benefits of freeing up their balance sheet.
WA debt collection agency Repcol is said to be one of the biggest local buyers of ledger books.
Collection House has been on the hunt for ledger book debt for the past 14 months.
The agency this month announced the purchase of two debt portfolios from Australian financial institutions with a total face value of more than $240 million.
Collection House is buying both “non-distressed” and “quality debt”. It has made six such purchases, increasing the total value of debt ledgers’ work in progress to more than $550 million.
Institute of Mercantile Agents debt collection sub-committee chair John Udall said while the practice had been going on for the past 10 years, it was only now that large international debt collection houses had entered the market that it was becoming more popular.
“Like with most things we are a little bit in the wake of the United States,” he said.
Banks contacted by Business News said they preferred to keep debt collection in-house as it formed part of their cusotmer service. However a Westpac spokesman said that the bank had occassional debt sell-offs after debtors had been pursued for more than five years.
According to Australian Collectors Association national president David Cains, debt collection agencies pay between as little as one and 10 cents for every dollar of debt they purchase.
Outsourcing the account depart-ment is also gaining popularity.
“Collecting debt is dead, the future lies with account receivables,” Mr Cains said.
Selling the ledger books differs from the practice of factoring which occurs when firms use the book “asset” to receive a line of credit.
When selling the book “asset” the debt collector actually owns the ledger and can pursue the debtors to recoup their money. In some cases the debt collector can recover 60 cents or more in the dollar, depending on how much the ledger book had already been “worked over” by the seller of the ledger book.
Mr Cains said it was a huge industry in the United States, while in Australia banks and other large institutions were only just starting to wake up to the benefits of freeing up their balance sheet.
WA debt collection agency Repcol is said to be one of the biggest local buyers of ledger books.
Collection House has been on the hunt for ledger book debt for the past 14 months.
The agency this month announced the purchase of two debt portfolios from Australian financial institutions with a total face value of more than $240 million.
Collection House is buying both “non-distressed” and “quality debt”. It has made six such purchases, increasing the total value of debt ledgers’ work in progress to more than $550 million.
Institute of Mercantile Agents debt collection sub-committee chair John Udall said while the practice had been going on for the past 10 years, it was only now that large international debt collection houses had entered the market that it was becoming more popular.
“Like with most things we are a little bit in the wake of the United States,” he said.
Banks contacted by Business News said they preferred to keep debt collection in-house as it formed part of their cusotmer service. However a Westpac spokesman said that the bank had occassional debt sell-offs after debtors had been pursued for more than five years.