Home' Border Enterprise : Winter-Spring 2010 Contents 38 enterprise
The debt collection business is booming and,
for consumers, that should be worrying, writes
GETTING IN OVER
THAT a lot of people are struggling
to pay their bills should not
be surprising given Australian
households are among the most
indebted in the world.
But it also seems that for many people,
especially younger people, the stigma of
not paying bills on time has largely gone. It's
The biggest privately owned debt collector,
Prushka, has been taking on staff as business (new
debts coming in to be collected) has increased 80
per cent from a year ago, when consumers were
concerned about the financial crisis.
Contrary to what most of us think, the
business of debt collection booms in the
buoyant economic times, says the chief
executive of Prushka, Roger Mendelson. That's
because when people are confident they borrow
more, debts build up and bills go unpaid, he
says. Interest rates are rising but consumers
still feel confident, particularly about their job
security. And, as house prices rise, consumers
Debt collectors are like the canary in the
coal mine. They are in the front line and can
pick the trend early, before it's reflected in
Prushka has more than 180 staff in 40
offices around the country. It provides debt
collection services for small- and medium-size
businesses including professional practices,
such as medical and veterinary clinics, retailers,
tradesmen and builders.
A year ago, business for Prushka was
substantially down because there was less
credit being advanced during the economic
downturn. Perhaps the federal government's
one-off cash handouts, which were part of the
government's economic stimulus package, also
helped consumers to pay their bills. But now it is
not only more consumers having trouble paying
their bills; it's also that smaller businesses are
watching every cent as the banks are putting
the squeeze on them with high interest rates for
business loans and tougher lending criteria.
Mendelson says businesses with the best debt
recovery are those family businesses where
the owners know that if they do not collect
the debts they will not be able to pay their
children's school fees. But of all the businesses
that Prushka acts for, veterinary clinics have
always had significant debt collection problems.
"People's great love for their dogs tends to
diminish when the bill comes in," he says.
Smaller healthcare businesses, like pathology
and radiology practices, are another with big
arrears in unpaid bills. Mendelson says it grows
as the gap between what the practitioners
charge and what is claimed by consumers
through Medicare increases.
As to the reasons people do not pay their
bills, Mendelson says it can be just that
people are disorganised or have moved
house. But, he says, for a high number
of households it takes only one thing
to go wrong and they fall behind.
An unexpected expense can put the
household budget out of kilter.
Mendelson has been running Prushka
for 33 years. One of the biggest changes
he has noticed over that time is how
younger people are much
more relaxed about
paying bills on time
than their parents.
Younger people are
less likely to regard
receiving a call for an
unpaid debt as a stigma
- they are more likely to see
it as just a part of life, he says.
In the regional areas there is more "honour",
where people just pay their bills, compared
with the cities, where people are in more debt.
Mendelson says the degree of belligerence from
those consumers that Prushka chases for money
in Melbourne is not very much at all, whereas in
Sydney, consumers tend to take a harder line
with debt collectors.
Consumers should not be complacent about
paying bills on time. Under the proposed changes
to credit reporting, lenders will have much more
information about those who get behind on their
loan repayments and it will be much easier to
identify those struggling with debt.
--- Sydney Morning Herald
Links Archive Enterprise Spring-Summer 2009 Spring Summer 2010-2011 Navigation Previous Page Next Page