What effect has the global economic slowdown had on the credit
and collection industry in your region of the world?
The depressing news from around the world Credit is more difficult to obtain with tighter risk
continues to weigh heavily on the Australian evaluation. There is less money available due to
economy, but until recently there have not been the difficulties faced by the banking sector,
significant measurable consequences. Australia’s particularly in the home loans sector—with a
banks have fared extremely well and have not been typical loan-to-value criteria of 75 percent, this has
exposed to the “toxic loans” scenario faced across been compounded by 25 percent to 30 percent
the United States, the United Kingdom and devaluation in house prices.
Europe. That said, the slowdown for Australian
raw material exports that has been caused by the Credit card companies have tightened their
change in economic circumstances elsewhere has lending and in some cases have raised their interest
begun having an affect on Australia, and the rates, even though the bank base rate is .5 percent.
economy has slowed, unemployment has begun to Debt recovery agencies are experiencing greater
rise and collection activity has decreased. volumes, but maybe not as much as might have
been expected. Collections are definitely more
The impact of these changes is not dissimilar to difficult, with more consumers opting for
that being experienced elsewhere in the world. repayment arrangements over the longer term
However, because our unemployment has lagged rather than settling immediately.
behind the losses that have occurred elsewhere,
some of the drivers have remained solid for longer. More worrying is the frail position of some larger
There is an increase in the volume of work being agencies and debt buying operations as their
referred to agencies across the country and an holding companies find the difficult economic
Paulson Lum increase in the number of accounts being offered climate and lack of funding is slowing down the
for sale. Recovery rates are beginning to slow, but momentum. As a result, debt buying prices have