BEWARE OF THE WOLF…
In this period of financial crisis, in Italy credit protection sector has gained an increasingly important macroeconomic role.
In an economic environment where:
- Per capita GDP is down 9%
- The unemployment rate is nearly 13% and the youth one is beyond 44%
- Banks have NPLs average rates between 10% and 25%
- The judicial system is characterised by a pathologic slowness, with an average
duration of civil lawsuits of 7.4 years
the extrajudicial debt recovery represents the bastion to stem the spiral of uncertainty, low investments, credit crunch and poor cash-flow.
From this standpoint, the Department of Economy from University of Genoa analysed data presented by UNIREC (the Italian National Association of the Debt Collection Agencies) in its V° Report during the last Annual Congress (may 2015).
Some very important conclusions emerged.
Firstly, the total amount of the debts recovered by collection agencies operating in the market is approximately € 10 billion (5.7 collected from the banking sector) out of € 56 billion referred.
In order to better understand the importance of this figure, the analysis compares it with the total amount of debts recovered by the Italian Taxes Agency (Agenzia delle Entrate), whose number of employees (cost of their salaries borne by Italian taxpayers) doubles the one of UNIREC members (no cost borne by Italian taxpayers) and which can use some very aggressive/coercive tools to perform the collection activity.
In the same year the Italian Taxes Agency recovered € 14 billion, an amount slightly greater than the one collected by debt collection agencies.
Anyway, the most significant part of this analysis relates to the attempt to assess the impact of such amounts on the national GDP.
Unfortunately, at the moment there is no technique to evaluate the impact of debts collected in non-banking sectors on GDP. By the way even limiting the field of research only to the banking sector, according to a study of the International Monetary Fund, the analysis of the University of Genoa shows that € 5.7 billion, the amount recovered on the behalf of banks by UNIREC members, does represent an increase of € 2.1 billion in GDP in the following 4 years.
This is a very interesting data confirming the importance of the role played by debt collection sector in the Italian economy.
In spite of this fact, it should be noted that the Italian debt collection industry has been undergoing a state of deep uncertainty for two years. The current situation is even worse than the one created in the late 90’s by the issuing of Masone Circular (UNIREC decided then to lodge an appeal against this Circular before the Court of Strasbourg and obtained its cancellation). Nowadays, in a situation characterised by the issuing of heavy penalties by the Italian Competition Authority (AGCM), the debt collection industry seems to have lost the (few) certainties acquired from 1996 to present.
Of course many questions run after each other: a situation like USA, where a company which attempts to collect a debt from a debtor who has already paid can occur heavy penalties, is likely to became a reality also in Italy?
How is it possible that in an EU country like Spain it is permitted to collect debts dressed strangely (e.g. El Cobrador del frac, El Monasterio del cobro) letting know in fact to all neighbourhood that the individual is a bad payer whilst in Italy, regulated by the same EU legislation, it is problematic even to talk with debtors’ family?
Can the inviolable respect for consumers’ rights block a system which represents many GDP points and which is like pure oxygen for asphyxiated Italian economy?
Is it correct to say that, sometimes, industrial collection processes are exasperated and influenced by continuous demands for high performances and tariffs reductions which impose to substitute the negotiation with the torment?
Is it possible to get out of this situation and revitalize the debt collection industry?
Those themes and many others will be the focus of the 9th edition of the Credit Village Day, that will be held in Milan on the 2nd of December. The event will be moderated by Sebastiano Barisoni, an Economic-Journalist from Radio 24 and will count the presence of important Italian and international key players of this industry.