Research sponsored by Firstsource, the global business process outsourcing company, indicates that the credit crunch has not yet had a major impact on the consumer debt management industry. More than a quarter of respondents (26 percent) said they had not been affected by the declining economic environment, and over half (53 percent) reported that they had monitored only minimal impact.

The poll covered nearly 1,000 consumer debt managers of companies in the financial services, telecommunications, retail, and utility industries.

However, although debt managers say they have not yet been significantly affected by the credit crunch, the research showed signs that consumers are starting to take longer to pay their bills, and that write-offs of consumer debt are increasing. Twenty-seven percent of respondents said that some consumers are delaying payment of bills by up to three months, and twenty-two percent of debt managers reported that they had increased their write-offs of customer debt in the last 12 months.

In response to the uncertain economic outlook, debt managers expect to outsource more work to specialist collections and recovery agencies to increase their collections levels, reduce defaults, and lower their costs. Sixty eight percent of debt managers said they planned to increase their use of outsourcing within the next year; 27 percent said they would outsource more within the UK, 18 percent reported they would collect more from offshore, and 23 percent expect to outsource more both within the UK and offshore.

Matthew Vallance, Firstsource’s president, said: “Although most consumer debt managers report that they haven’t been rocked by the credit crisis, the trend amongst consumers is towards later payments which will consequently affect cash flow. Therefore debt managers are looking to specialist consumer debt collections and recoveries outsourcers in the UK and offshore that have the expertise and resources to collect more debt, in faster time frames and at lower cost than is possible in-house.”

Debt managers said that the main benefits of an offshore strategy are further cost reduction, the ability to recover more debt, and increased access to talent.

Most of the collections work that has been outsourced to date is debt collection (35 percent of respondents), tracing (identifying and prioritising debtors to contact, 25 percent) and legal collections (24 percent).

The majority of outsourced collections relates to early stage work (debt that is one to 60 days old, 42 percent of respondents), followed by recoveries (six months, 26 percent), late stage (90 to 180 days, 21 per cent), then mid stage (60 to 90 days, 10 percent).

Respondents said that there were many areas where they could see obvious rooms for improvement in their collections strategies. The main failings relate to poor use of technology. Over half of debt managers said greater use of online payment systems would improve their collections levels. Many managers also felt that they should make more use of interactive messaging and interactive voice recognition systems.

Better analysis of customers’ debt levels and internal training were two other key areas identified for improvement.