India-based Debt Collection Business Soars

With the U.S. economy slipping into a potentially deep and prolonged recession, and increasing number of Americans unable to pay their debts, the debt collection call-center business in India is soaring.

According to a report in The Washington Post, India handles an estimated $16 billion -- or about 5 percent -- of delinquent U.S. accounts. More complicated health insurance bills and mortgage payments are still largely handled inside the United States, industry executives say. The debt collection business is expected to continue to grow as debt rises and companies look to cut costs, industry experts said. Aegis call center in New Delhi, which handles nearly a fourth of debt collection outsourced from the United States, is experiencing rapid growth. The company is setting up a second office building for 5,000 employees, many of them to be hired over the next few years. Most employees are college-educated and in their 20s. They earn about $5,000 a year, a competitive starting salary in India, but less than a quarter of what their counterparts in America make. There is almost a cult following of America among call center workers, a fantasy where hopes and dreams are easily achieved by people who live in a wonderland of well-paid jobs, big homes and expensive vacations. This perception seems to be changing, at least among the Indian debt collectors who regularly listen to sob stories of trouble in paradise.

U.S. household debt has increased from about 50% of GDP in 1980 to a peak of 100% in 2006, according to Harvard Business Professor Nial Ferguson who recently wrote a column for Time Magazine. In other words, households now owe as much as the entire U.S. economy can produce in a year. Much of the increase in debt was used to invest in real estate. The result was a bubble; at its peak, average U.S. house prices were rising at 20% a year. Then — as bubbles always do — it burst.

Professor Ferguson believes that U.S. banks and other financial institutions are in an even worse position: their debts are accumulating even faster. By 2007 the financial sector's debt was equivalent to 116% of GDP, compared with a mere 21% in 1980. And the assets the banks loaded up on have fallen even further in value than the average home — by as much as 55% in the case of BBB-rated mortgage-backed securities.

The heavy debt and deflating asset prices are now forcing "deleveraging", the sales of assets in a down market to pay debt that is contributing to an even greater drop in the value of stocks, bonds and real estate. With the banks trying to build up their capital reserves, they are not lending to even the most credit worthy customers, or to each other. Such caution is resulting in heavy job losses at businesses unable to borrow to meet their business needs. This climate has caused a significant loss of confidence among consumers, businesses and investors making matters worse. It is becoming a vicious cycle that the US Treasury and the Federal Reserve are trying to break by pumping over a trillion dollars into the banking system. However, the banks' continuing reluctance to lend is forcing a change in strategy by Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke. Both leaders are now buying stakes in the banks to try and change their behavior to relieve the continuing credit crunch.

The massive consumer and corporate debt and the unprecedented debt-addiction has brought the U.S. into this crisis. Ironically, it is the sudden withdrawal of debt that is making the situation worse. The contagion has now spread to the rest of the industrialized world. We are in uncharted waters now. Let us hope the captains of U.S. economy can navigate us out of the severe storm with as little damage as possible. Meanwhile, it is an opportunity for debt collectors in India to see the seamy side of the life in US while they make a few extra bucks to improve their own lives.


Riaz Haq said…
India's middle class is drowning in growing consumer debt, generally thought to be an American disease.

The amount of unsecured loans and credit-card receivables more than three months overdue is about 7% to 9% of total loans outstanding this year, and is about to head as high as 15%, according to ratings agency Crisil Ltd. in Mumbai.

For some, the problems are overwhelming. When police broke down the door of the Nair family's suburban apartment here earlier this month, they found four bodies and 73 credit cards. Burdened with too much debt, the Nairs decided to take their own lives, police suspect. A.K. Nair, 70 years old, and his wife, Shyamal, 60, swallowed poison. Their middle-aged son and daughter hanged themselves.
Riaz Haq said…
#Americans duped into losing $10 billion by illegal #Indian call centers in 2022. Most of the victims of these #fraud calls from Indian phishing gangs were elderly #US citizens above the age of 60 years, according to #FBI. #India @deccanherald

After several incidents were reported in 2022, the FBI has now deputed a permanent representative at the US embassy in New Delhi. The representative will work closely with the CBI, Interpol and the Delhi Police to bust these gangs that have put India under the threat to be termed as the hub of such illegal call centres.

Americans lost a total of $10.2 billion in 2022 so far, which is a 47 per cent increase from 2021’s $6.9 billion, to such fraud calls. FBI’s South Asia head Suhel Daud told the publication that "romance-related" frauds reported were worth Rs 8,000 crore in 2021 and Rs 8,000 crore in the last 11 months of 2022. Losses due to "tech support" crimes were as much as $3 billion in the last two years – $347 million in 2021 and $781 million in 2022 so far.

“It may not be a national security concern yet, but the reputation (of a country) is involved, and we don’t want India to suffer on that count,” Daud told the publication. He also noted that the FBI’s website has registered 8.5 lakh complaints in 2021 and over 7.8 lakh complaints so far in 2022 in regard to internet crimes. Those complaints included cyber crime related to investment ($3 billion), business email compromise ($2.4 billion), personal data breach ($1.2 billion), romance($1 billion) and tech support ($781 million).

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