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Debt collecting a brisk business in tough times

Debt collecting a brisk business in tough times

Amid slow economic growth, collectors see significant rise in clients as debt figures rise

NOTWITHSTANDING Singapore's slow economic growth in recent years, which has hit many industries, the debt collection sector stands out as one that is enjoying brisk business with debt collecting companies that The Business Times contacted reporting a significant increase in the number of clients who have engaged their services over the last three years.

Homegrown SME Singapore Debt Collection Service (SDCS), for example, reported that the number of cases it received has more than doubled from 200 jobs in 2013 to slightly over 400 in 2016.

KX-Unit Debt Collection Agency (KX-Unit), which began operations in 2015, saw a 30 per cent increase in clientele in 2016. Of the total number of cases received presently, the ratio of corporate to individual cases is around 6:4.

One of the reasons for the growing customer base appears to be a rise in troubled small businesses, many of which run into debts prior to ceasing operations.

The latest figures from the Insolvency and Public Trustee's Office under the Ministry of Law show that the number of companies wound up last year was 187, a 47.2 per cent increase from 2013.

Similarly, the number of petitions for compulsory liquidation last year increased to a decade high, peaking at 280, a 9.8 per cent increase from the 255 petitions recorded in 2015.

Although economic growth this year is projected to be better than last year's 2 per cent, the gains are uneven for different industries, with small and medium enterprises (SMEs) facing a tougher time amid rising operating costs and therefore rising debt burdens.

Chief executive of SDCS Yvonne Ho said: "When small companies are unable to bear their overheads in times of economic difficulty, some of them close down and go off the radar. The people to whom they owe money, such as their suppliers, landlords and employees, will come to us for help to track them down and recover the funds. If they are unable to pay the whole sum upfront, we will try to arrange for them to pay in monthly installments."

One of the industries that has been increasingly tapping debt collection services is construction.

According to the Singapore Commercial Credit Bureau, slow payments in the construction industry made up more than 40 per cent of all transactions in the second quarter of this year.

KX-Unit director Winston Chin said: "A lot of these cases are a result of contractual disputes. When the economy is not doing well, sub-contractors compete to offer the lowest possible price to their clients. As a result, firms tend to cut corners, compromising on the quality of their goods. When these faults emerge, clients are not willing to pay the amount promised initially."

Vantage Debt Recovery (VDR), another debt collector, said that other than construction firms, its other big clients are car leasing companies, such as Fusion Car Rentals and Yes Motoring. "We've seen cases where people refuse to pay for repair costs after the car has sustained damage during their time of use. Some even try to escape with the car by not returning the keys," said VDR managing director Jasmine Tan.

The number of people approaching debt collection companies for investment scam cases are also on the rise, according to Roger Rajan, department head of licensing at another debt recovery firm, JMS Roger's.

He said: "Almost 20 per cent of our cases fall in this category. With the commoditisation of technology, scammers can easily reach a large pool of potential victims.

"The key to solving these cases is finding the mastermind orchestrating the whole thing. We sometimes plant our own officers to join the schemers to gather more evidence."

Though the industry is thriving, competition is stiff. According to Mr Rajan, the number of debt collection firms has escalated rapidly from around 40 in 2003 to more than 200 now.

Added Ms Tan: "Whether it's good times or bad, as long as there's money owing, there will be creditors and debtors, which equates to business for us."

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