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Swedish consumer loans continue to rise, according to recent statistics from Statistics Sweden. In October, consumer loans to households had a growth rate of 6.2%. At the same time, more and more borrowers will have payment problems soon after loans are made, according to the Finansinspektionen 2020 consumer loan survey. This is especially true for young people. 4.5 percent of new borrowers receive a debt collection claim during the first few months of the loan, but for borrowers under the age of 25, the proportion reaches eight percent, the report shows.
At the same time, there are many companies whose business consists totally or partially in buying unpaid debts. Financial giants Arvato finance, Alektum capital, Lowell, Sileo kapital and Sergel finans are some of the companies that buy loans and debt bonds from banks and companies in the credit market, and in total withdraw multi-million dollar sums from the deals.
Even if the companies are not themselves You can increase interest rates on previous loans, there are large sums to be earned. The longer clients take to pay off their debt, the more money the debt buyer receives in the form of interest and fees. If the debt collector fails to receive the client’s money, despite reminders, the matter ends with the Enforcement Officer.
– Those who buy the debts can, in principle, try to collect the money indefinitely. There are prescription rules for three or ten years, but if the company sends reminders to the customer, it is a prescription break, so the debts can, in principle, live forever, says Johan Krantz, the compliance officer.
Every year, the bailiff receives a large number of cases in which companies that have bought debts request help in collecting money. Only in the first half of 2020, for example, Sergel Finans submitted 22,333 requests for payment orders, a kind of demand letter that the debtor must answer, both for his own debts and for those he collects for others.
Sergel Finance is part of it group that owns fast-loan giant Marginalen Bank. Your latest annual report shows that your entire business concept is to buy past due receivables. At the beginning of 2019, they had overdue portfolios of more than SEK 1 billion, and for the rest of the year they purchased debt for an additional SEK 353 million.
Purchasing past due debt is also one of Arvato Finance’s core and growing business areas. In 2019, the income from the portfolio with liabilities approached 94 million SEK.
In the same year, Sileo Kapital earned interest income of just over SEK 246 million from the company’s purchased accounts receivable portfolios with the majority of the company’s sales coming from the Swedish market. Sileo Kapital does not want to comment on questions about the loan market in general, but says the company’s focus is on accounts receivable from companies that are licensed to make loans.
There are many reasons to businesses that choose to resell accounts receivable or past due loans, even though they can make money from them. One reason may be that the business is able to add money quickly to cash flow. Another reason may be that it simply takes too long for the company to collect debts. Companies that specialize in buying debts are generally better at collecting them, says Marieke Bos, a researcher at the Swedish finance house of the Swedish School of Economics.
– It is expensive for a bank to call and hassle customers while a debt collection company has large call centers that specialize in just that, he says and continues:
– They also have better methods of assessing the likelihood of someone paying, in other words who is worth investing resources in.
Several of the companies As DN has mapped, it claims that managing past due accounts receivables is part of a growing business. Alektum, for example, invested heavily in accounts receivable portfolios in 2019 and estimates that they will provide a good return in the future. Accounts receivable come primarily from banks and e-commerce, Moa Tyborn, Alektum’s communications manager, says in an email.
She writes that the market has grown across Europe since the financial crisis of 2008-2009. It does not mean how much of Alektum Capital’s portfolio is made up of Swedish debt, but it suggests that it is a large part.
“Our home market The Nordic region is still the largest and naturally that market represents a significant part of our portfolio,” writes Moa Tyborn.
Kredithanteringsbolaget Lowells Swedish companies withdraw much of their income by buying overdue debts from banks, among others. In 2019, the value of the company’s purchased liability portfolio amounted to just over SEK 2 billion, a portfolio that generated revenue of just over SEK 281 million in the same year. Fredrik Skärheden, the company’s communications director, agrees that the market for past due debts is growing.
– It is partly driven by regulations that make it difficult and difficult, for example, for banks to have loans that they do not believe they can obtain on their balance sheets. Since then, we have also had a period where we as consumers have borrowed more and more, and this of course also has a driving effect on the non-performing loan market, he says and continues:
Fredrik Skärheden, Lowell’s communications manager, believes that ethics and morality are important in the industry.
Photo: Alexander Donka
– Both banks and other companies are starting to turn to our type of players as more and more people begin to see that customers are well served and receive a good response from administrators.
Is there an ethical dilemma to make money with people in debt?
– Our business is not so one-sided. We must have reasonable conditions to recover a worthy part of the capital, and what we do is work with long-term payment plans, which are at a manageable level. It’s a balancing act, you can’t push too hard. Ethics and morals are among the most important things in this industry, otherwise it won’t work, he says.
However, Johan Krantz points out that the debt purchase market can be seen as problematic. When the lender or lender knows that part of the debt can be paid by reselling it to another company, lending large sums of money is not so risky. This can lead to people being approved for loans or credits, even if they have difficulty paying them.
– When there is a good market to sell debt, lending companies may be motivated to take slightly higher risks and lend money to people with worse credit information. You can loan a lot of money and take on some credit losses because they won’t be huge yet when you can later sell your claim, says Johan Krantz.
Arvato and Sergel’s financiers have declined to answer DN’s questions.
