For several weeks, the fear of a legislative decree aimed at helping families and business in difficulties, has been on the table among professionals in the NPE world. Many colleagues and main player/institution have already expressed their thoughts, with which we can only align ourselves: as thought, it is certainly not feasible and the negative effects on the economy in general would be much more than the positive ones.
This dutifully clarified, it is our intension with this article to raise attention on other issues still pertaining to the debtor party, resulting from the development of this new industry. Not theoretical speaking, but practical and already present in our daily work.
There is a lot of talk (rightly, I would add) about sustainability and ESG criteria applied to all areas of business and production. So, it is maturing in worker and the consumer, the awareness, and the need to understand the impact of one’s choices about the environment, understood not only in the “green” sense.
Our young debt collection industry, few months now, has been facing a totally new situation. Most likely the reader is an insider, so I will avoid to going into the economical dynamic of the period (raw material, inflation, raising rates etc.); instead, I would like to focus on a growing dynamic that are having a strong social and misalignment impact, on real economic.
In a forcibly simple way, this is the summery of what is happening: due to the increase in reference rates and due to the need to support audacious BP, the conditions of repayment for a debtor are becoming unsustainable.
The adjective it is used not by chance: what typically happens is that an instalment that takes into account, the prospects of realization of the servicer/noteholder is rarely compatible with the repayment capacity of the debtor. In these cases, the servicer offers a significant upfront payment to support the numbers, despite the obvious fact that in a situation of financial tension it is unlikely that the debtor has accumulated a significant savings.
However, this is just one side of the coin. The real issue is not represented by the worsening conditions of return, but by the clear and evident disparity/inhomogeneity between different debtors in the same situation. In essence, the debtor’s hope of redeeming his own position depend equally on his ability to restart producing income again and on the luck of having found the right creditor.
The rise in the rates and therefore in the expected returns for investors in this asset class has only highlighted and made extreme a phenomenon that had already begun with the massive sale of non-performing loans. The consequences of this trend are different, all with transversal and evident social impact:
- Differences of conditions between debtors of the same institution/originator according on the timing and the condition of the assignment (transfer) of credit.
- Differences of conditions between debtors of different institution that have contracted the same type of loans.
- Misalignment of interest and diversity of approach between the various creditors: those who can afford to “grow” the client and support a repayment plan, and those who have no interest to in nurturing the client because they don’t do banking and can do nothing but take legal action.
I am sure that whoever read can perfectly understand that the article doesn’t have moralist or do-gooder content. We and all our colleagues continue, and we will continue to carry out our duties with professionalism, to pursue the objectives of the BPs in compliance with the codes of ethics no more and no less than before. We are also certain that the reader have cleared that the dynamics here described are clearly disconnected from the topic “ Proposta Legge Congedo”, which is certainly not the solution.
Nonetheless, it doesn’t mean that we cannot highlight a significant trend, full of our social fabric, that are going to focus on some of our cultural characteristic traits, such as the property of the first house.
Also evident is that if exist a solution this is found outside of our industry and cannot be left to the autonomy of the player operating the free market.
In our point of view what is need to be initially done, as the bare minimum and quickly, is to spread the culture in this sense. There is a need for greater awareness for the consumer and for companies of how much the credit chain has changed, of what are the needs of the new players and their consequences, starting from the credit disbursement contract.
Quoting a dear friend, we are the country in which to make a PAC of 100 eur/month you need to profile your attitude to risk and families without any financial education freely take out five-figure mortgages. All of this are examples of the current situation, for a change of course it will be necessary to row hard and against the current.
Emanuele Grassi
