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Three trends in consumer debt – and how to make sure your business stays ahead
by Ian Haddon

Originally published in Wealth & Finance International

It may not always feel like it, but we are living in a more open, kind, and holistic society since the pandemic. The spirit of pulling together and looking out for each other has manifested in a shift in how we expect our society to work. Take the phrases ‘debt forgiveness’ and ‘loan forgiveness’. These terms barely registered in US Google searches before the pandemic, but have become much more common since 2020.  

Support for those in need is still far from perfect, but attitudes towards debt are changing. A great example of this is President Joe Biden’s plans to forgive up to $20,000 of student loan debt for those who qualify. Though there are still some legal challenges to resolve, the idea of the US Government spending $400bn on writing off debt would be unthinkable before 2020.  

Part of the reason why we have become more forgiving towards debt, is unfortunately because financial difficulty is a more common problem today. More than a fifth of adults report borrowing more money compared to a year ago. One in four people started 2023 in debt due to the cost-of-living crisis. 

A report by charity StepChange released in January discovered 24% of people in debt cite a ‘cost of living increase’ as the main reason, compared to 9% in January 2022 - a 167% uplift. 

As the factors that lead to debt change, so too are the demographics of those who find themselves owing money. For collection agencies and departments, understanding these movements are crucial for ensuring operations remain effective.  

Here, we reveal the trends in consumer debt and explain how you can ensure your business stays ahead of them. 

1. More women in debt 

There are two major demographic shifts in debt that firms should be aware of. The first is a rise in the number of women who are seeking help. According to StepChange: “The proportion of women among our new client population has increased substantially, up from 62% in December 2022 to 65% in January 2023.” This figure is also higher than 12 months ago. 

The rising cost of living – predominantly affecting food, fuel, and consumables – has a disproportionate impact on families, especially single-parent households. With 90% of single parents being women, it’s little surprise to see more facing financial difficulty. 

Collectors need to adapt their responses for those with dependents. No matter the size of the debt, you are unlikely to be the priority. Payment plans need to ensure children come first. They also need to be communicated in a way that can be understood around busy family schedules. 

Additionally, StepChange has recorded an uplift in those that are in some form of employment – 58% in January 2023. This indicates that for the majority of those in debt, some will at least have income to create payment plans. These people must be given the time and space to take stock. 

2. A new generation 

The second demographic shift is the rise in younger adults reporting that they are taking on debt – some for the first time. According to Experian, Generation Z (those born 1997-2013) experienced a 25% jump year on year in average debt balance. As this generation takes on their first-ever car payments, student loans or even mortgages, these young adults are getting a crash course in credit. However, many feel unequipped to deal with it. Santander recently launched a new campaign for its financial education program – The Numbers Game. The bank cites research that two thirds of young people in financial difficulty cite ‘lack of education’ as a reason. Businesses must be able to explain debt and the collections process in simple, clear, and concise language. 

Firms that use conversational AI to complement the style and tone of customers will engage best and maximise their chances of recovering money owed quickly. 

3. Types of debt 

It’s not just the demographics of debtors that are changing – the types of debt that they are facing is changing too. In previous decades the main reasons for borrowing were for mortgages or for payments on tangible assets, which could be reclaimed if necessary. Now the proportion of people with unsecured debts – not based on assets – is increasing. StepChange has recorded rises in the proportion of clients with personal loans, catalogue, and store card debts. 

The rise in unsecured debt has been recorded both in the UK, where it has risen steadily since October 2021 as the economy reopened and in the US where the largest rises were for personal loans (+18%) and credit card balances (+16%). Those that are in the quicksand of having unsecured debts need support – not just in paying it back, but in making sure they do not end up stuck again. Collectors should communicate at the first sign that someone is falling behind on their payments because this will lead to more on-time payments and a more positive user experience. 


As the nature of debt changes, so too must the way businesses respond. We’re seeing a shift towards a younger debtor, more likely with unsecured debt and little understanding about financial matters. We’re seeing more people who owe money because of external factors, rather than reckless spending. There are also more people struggling financially who are already in work. For those in charge of collecting debt, this suggests that they need to begin the conversations with people early on to help them understand what will happen if money cannot be repaid. They need to use a range of channels, particularly those favored by Generation Z and Millennials, to engage. Finally, they need to provide flexibility and communicate with empathy to deliver the best results. 

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