At https://www.fnarena.com/index.php/2020/08/20/best-and-worst-of-times-for-debt-collectors/ Tim Boreman of 'The New Criterion' wrote a reasonable piece on CCP, but he stated, “As Credit Corp noted in its recent profit results, recalcitrant debtors went on a repayment strike in March – when the Covid-19 chaos started to unfold – and abandoned long term repayment plans.” This is much stronger language than what CCP stated, and it suggests a more negative picture than what CCP can expect, and what Encore Capital in the USA and Intrum in Europe have experienced in Q2 of calendar year 2020.
CCP's EOY Presentation states, “Since March 2020 customers have been less prepared to agree and maintain longer-term repayment plans, producing a sharp initial decline in collections and a rise in arrears.” and as a footnote, “The reduced ability to agree new repayment plans means that recently purchased PDLs comprise the bulk of the impairment and collections shortfall.”
My understanding is that debtors who had agreed to repayment plans did not abandon them in a meaningful way. Some may have asked for some form of relief, but in contrast, some settled early, meaning that by 30 June 2020 collection arrears were at normal levels, or as CCP words it, More recently, increased willingness to make one-off repayments has, brought May and June PDL collections back to pre-COVID expectations.
As I see it, the significant problem is that CCP had invested more heavily than usual in PDLs just prior to Covid-19 raising its ugly head, and it is these new PDLs that experienced a lower than typical propensity to agree to repayment plans. Subsequent PDL purchases are not a problem, because they were, and will be, priced lower to recognise this reluctance. Note, the reluctance is not to repay the debt, it is to commit to a plan, and for many, committing to a plan would simply take more time. In Appendix 4E and Consolidated Financial Statements report, one can read, “The reduced ability to agree new repayment plans means that recently purchased assets comprise the bulk of the impairment and collection shortfall.”
If you look abroad, Encore in the USA and Intrum in Europe, you can read that they both recovered well in the 2nd quarter of calendar year 2020. Intrum reported, “In southern Europe in particular, the reopening of societies progressed at a faster rate than we expected at the beginning of May, when we published our first quarter results. Meanwhile, collections in our Portfolio Investments segment during the second quarter performed stronger than our forecast, in addition to which, we have maintained a tight control of costs. These three factors combined contributed to a better performance in the second quarter than we anticipated at the end of the first quarter, which we also communicated in our market update on July 10th.”
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