Collections managers see a rise in arrears coming

Collections managers at banks, telcos and utilities are anticipating a substantial increase in the number of collections cases in the year ahead, according to a new survey.

Data analytics and credit scoring company FICO surveyed collections managers in Australia and New Zealand and found that they were concerned about high levels of consumer debt.

There have been mixed messages on household debt in recent weeks. The Australian reported analysis by UK bank Barclays, showing that Australian household debt is equivalent to 130 per cent of the country's GDP - up from 116 per cent before the financial crisis.

Barclays said the average household debt to GDP in developed economies was 78 per cent.

Barclays economist Kieran Davies said he was concerned that low interest rates would push the debt level higher and increase risks.

However, the Reserve Bank published research earlier this month showing that throughout the 2000s the household sector remained resilient to scenarios involving asset price, interest rate and unemployment rate shocks.

This was despite an increase in the Australian household sector's aggregate level of indebtedness (debt to income) from around 40 per cent in the 1980s to around 150 per cent by the mid 2000s.

The RBA researchers concluded that indebtedness was only weakly correlated with financial stress.

Eighty per cent of respondents to FICO's survey said they expected collections cases (when a payment goes beyond the late payment period) to increase by as much as 20 per cent in the year ahead.

FICO said that, as a result of this expectation, collections managers were paying more attention to ways of making their communications with customers more effective.

They reported that customers preferred to receive an automated voice message or SMS when they were being chased for overdue payments.