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Private group helps exchequer chase debts
From the Financial Times of Mon, 22 Dec 2014 07:02:19 GMT

Ministers have struck a deal with a private US-owned company in an attempt to collect more than £20bn in debt owed to the exchequer for unpaid taxes and student loans as well as overpaid benefits and grants.

The government is creating a joint venture with TDX Group, a leading “recovery management” company whose parent company, Equifax, is based in the US. TDX will have a 75 per cent stake in the new entity, Integrated Debt Services Limited, with the government holding the remainder.

TDX will receive a proportion of any unpaid debts collected beyond the figure secured in 2013-14. The Cabinet Office would not reveal the percentage to be paid, citing commercial confidentiality.

The move to establish the joint venture is the latest sign of how a smaller and leaner Whitehall is adopting different ways of working in the hunt for big efficiency savings. In the Autumn Statement last month, George Osborne, the chancellor, set a target of an additional £10bn in economies to be achieved by 2017-18.

Initial clients will include HM Revenue & Customs, the Department for Work and Pensions and the Student Loans Company. The aim is to widen it by bringing in other areas of the public sector, including local government.

The backdrop to the initiative is the government’s less-than-sparkling rec­ord in collecting what is owed to it from many sources. These include unpaid fees, taxes, fines and loans, overpaid benefits or grants, and unrecovered costs from court cases.

Earlier this year the Commons public accounts committee criticised the government’s failure to establish a “cross-government approach” to managing debt and securing more money for the exchequer, despite the direct impact it had on government borrowing.

This inaction had led to large volumes of old debts building up in departments that were unlikely to be collected, it said. The Cabinet Office said that working with TDX would allow the government “to access best-value private sector knowledge and expertise” on how to collect it. The other clients already signed up to the new venture are the Home Office, the Legal Aid Agency and the Driver and Vehicle Licensing Agency.

TDX Group, a supplier of debt collection systems based in Nottingham, was founded in 2004 by Mark Onyett, a former executive of credit card issuer Capital One. The group helps large businesses, including some of Britain’s biggest banks, manage their debt collection. It was bought by US-based Equifax, a credit referencing agency, at the start of this year in a £200m deal.

Mark Sanders, managing director of TDX Group, said it used data and analytics to understand what individuals in debt were able to pay. It then applied “the most appropriate and effective strategies using the best suppliers from the private sector”.

TDX’s software analyses customer data to categorise loans in order to identify the most suitable company to collect them at the best price. Its Plato platform, for example, provides businesses with an outsourcing arrangement that takes over the management of their debt portfolios, giving tranches to a range of collection agencies.

The business has grown substantially over the past decade, along with the expansion of consumer credit. TDX is estimated to have handled up to 50 per cent of total debt sales in the UK at one point, although that has dropped significantly over the past few years.

A recent report found that TDX might have inflated debt sale prices while lowering barriers to entry, allowing smaller companies to buy segments of loan portfolios.

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