Study: Almost 10 percent of population pursued by debt collectors

An enormous number of Czechs – almost 10 percent of those over the age of 15 – are in trouble with debt-collecting bailiffs. Indeed, more than 150,000 people in this country are facing a minimum of 10 distraint orders, according to the latest edition of a map of such cases released on Tuesday.

Illustrative photo: Barbora NěmcováIllustrative photo: Barbora Němcová The study by the non-profit Open Society found that in 2017 no fewer than 836,000 people in the Czech Republic were under some form of distraint, which is when one’s property is seized to obtain rent or other money owed.

The situation deteriorated further in 12 of the 14 regions in the Czech Republic last year, with 31,000 joining the ranks of those pursued by debt collectors. That represented a year-on-year increase of 3.4 percent on the figure for 2016.

One of the authors of the new edition of the map, Open Society’s Radek Hábl, said the numbers were growing despite the fact that the Czech Republic is experiencing record low unemployment and rising salaries.

Neither of these factors is helping people escape from the debt trap as debtors are continuously paying off high interest charges and various forms of penalties alone, said Mr. Hábl.

The worst hit regions are, perhaps predictably, the relatively poorly off former Sudeten areas of the country, such as Ústí nad Labem and Karlovy Vary, where a full 18 and 17 percent of the population, respectively, are pursued by debt collectors.

By contrast the Vysočina and Zlín regions are the least impacted, with “only” around 6 percent.

Mr. Hábl pointed out northwest Bohemia suffered from the highest level of unemployment along with relatively low wages and levels of educational attainment. All of these factors have contributed to the relatively high incidence of indebtedness there, he said.

Financial advisor David Šmejkal told Czech Television that the most common cause of crippling debt was a failure to fully consider the risks that could impact one’s ability to make repayments down the line.

Mr. Hábl said another factor has been the behavior of non-bank lenders, which took advantage of the fact people borrowed small amounts and upped those sums considerably via interest rates and penalties.

According to the freshly published study, half of debtors owe less than CZK 10,000, with most of the money being sought relating to costs and interest. The average principal in distraint cases is CZK 65,000.

Mr. Hábl points out that in the Czech Republic debt relief is only an option if a debtor has paid off 30 percent of what they owe.

The majority of debts are claimed by institutions, including transport authorities, telecommunications firms and the country’s social services agency.