The debtors are less likely to promise payments.
- The Czechs are still the least delinquent debtors in Europe
- Debt collection agencies expect a substantial decline in morality this year
- Agreements with debtors are becoming harder to reach
Czech debtors have been consistently repaying their obligations better than the rest of Europe, maintaining this top position. However, according to the latest data from the debt collection agency EOS KSI, among delinquent debtors, the willingness to promise payment of overdue amounts decreased by 2.5 percentage points, a 6% year-on-year decline. Meanwhile, the compliance rate with such agreements, meaning actual payment, increased by 3 percentage points. This suggests that uncertainties and concerns about the future have begun to manifest in debtors' reluctance to commit to repaying their debts.
This year will bring a deterioration in payment morality
According to EOS statistics, the impacts of a challenging economic situation are now apparent among debtors. As of the data for 2022, neither the pandemic nor the energy crisis had left a mark on debtors' delinquency, and the payment morality of Czech debtors in 2022 continued a long-term positive trend. However, predictions indicate that statistics for 2023 might not be as optimistic.
Agreeing on repayment with debtors is becoming more difficult
The Association of Debt Collection Agencies reports that the average amount of debt under the management of collection agencies has increased by 2,079 CZK. On average, Czech debtors repay 20,177 CZK to collection agencies. Additionally, EOS KSI has observed a year-on-year decline in debtors' willingness to negotiate agreements for paying off overdue amounts. "In our communications with customers, we have been monitoring the trend in the commitment rate for payment, that is, the willingness of debtors to enter into an agreement to settle their debt. And this value has declined over the past year. Our data clearly show that Czechs perceive their financial situation worse than a year ago and are reluctant to promise collection agencies something they cannot fulfill," explains Vladimír Vachel, the managing director of EOS KSI.
The willingness to promise repayment of debts has dropped significantly year-on-year in the South Bohemian Region, by almost ten percentage points. There has been a slight improvement in reaching agreements on debt repayment in only two regions - Prague and the Ústí nad Labem Region. However, the improvement is minimal, reaching only approximately one percentage point.
Debtors won't have the means to repay
The explanation for the reluctance to negotiate debt repayment could be the worsened standard of living for citizens across the country. Regardless of which region debtors live in, everyone faces higher energy prices and high inflation, which increases the price of items in the shopping basket. As shown by another EOS survey earlier this year, although Czechs save the most in Europe and only every seventh person has taken on new debt (in Europe, it was every fifth person), only every fourth person deems their savings sufficient. And it will get worse. "We don't rule out a sharp increase in debts and a sharp decline in monitored values throughout this year. Debtors simply won't have anything to take, it will be even more difficult to reach agreements with them, and their fulfillment by debtors will likely worsen. The economic results of the Czech Republic and the entire EU are not favorable, prices are not dropping, and the savings of ordinary citizens are dwindling," concludes Vladimír Vachel.
EOS KSI Czech Republic, s.r.o.
The EOS Group is a leading technology-based investor in debt portfolios and an expert in processing open debts. With over 45 years of experience and operations in 24 countries, EOS offers intelligent services to approximately 20,000 customers worldwide, primarily from banks, real estate, telecommunications, energy companies, and the e-commerce sector. EOS employs over 6,000 workers and is part of the Otto Group.