Debt collection consultants

“Debt collection agencies earn themselves silly”

(Bild: Markus Wenzel)

High inflation is causing more and more people financial problems, often resulting in over-indebtedness. Last year, there were over 21,000 initial contacts with debt advice agencies, the highest number for twelve years. High debt collection costs and interest rates cause the amounts to explode in the long term. But there are also beneficiaries.

Debt counseling services are alarmed to learn that 17 percent more people contacted a service for the first time than in the previous year. On average, people who turn to debt counseling are over-indebted by 55,000 euros. The most common reason is the loss of a job or a lower income (e.g. due to parental leave or retirement). The second most common reason is a lack of good money management. Around 18% have overstretched themselves financially as a self-employed person. "What is alarming for us is that one in eight people cite high living and housing costs as a reason for over-indebtedness," says Clemens Mitterlehner, head of debt counseling. This figure is twice as high as in the previous year.

More and more young people affected
Other frequently cited reasons that drive people into financial problems are divorce, personal misfortune or guarantees. It is mostly women who take on such guarantees or joint liability, for example for smaller businesses. In general, however, men fall into the debt trap much more frequently, almost 60 percent are male. Young people are also increasingly affected by over-indebtedness; around a quarter are under 30 years old. There is often a lack of financial education across all age groups. Many are then suddenly surprised by the mountain of debt.

Ultimately, this often results in personal bankruptcy. "There was an increase of 8 percent in 2023," says Mitterlehner. The fact that unemployment is currently on the rise can also be seen at the advice centers. "From our experience, we know that there is a slight delay before this happens," says Mitterlehner. When income falls drastically in one fell swoop, it is no longer so easy to finance the usual expenses. Mitterlehner therefore warns against cutting money for the unemployed, as this would exacerbate the situation.

"Debt collection agencies earn themselves silly"
Once unemployment or failed self-employment has fueled over-indebtedness, those affected often find themselves in a dangerous "vortex". According to debt counselors, debts triple every eight years or so if they are not repaid. Mitterlehner calls for a maximum doubling due to follow-up costs.

In addition to interest and compound interest, collection costs and fees also play a significant role. Social Minister Rauch criticizes common practices in this area: "Debt collection agencies make money from over-indebted people. We have included an upper limit for debt collection costs in the government program, but negotiations are proving tough."