Over the past decade, the way Australians borrow and spend has changed dramatically. Traditional credit cards still account for a huge share of household debt, with total balances reaching $41.96 billion as of mid-2025. However, newer credit models like Buy Now Pay Later (BNPL) have made access to credit easier than ever, especially for younger consumers who prefer alternatives to traditional banking products.

While this evolution in consumer borrowing has broadened borrowing options, it has also increased the risks of default and created challenges for businesses and lenders attempting to recover overdue payments. Here’s a closer look at the state of consumer debt recovery in Australia today.

What is Consumer Debt?

Consumer debt refers to the money individuals borrow to cover personal expenses rather than business or investment needs. It typically includes credit card balances, personal loans, car loans, Buy Now Pay Later (BNPL) arrangements, and sometimes medical or utility bills. Unlike commercial debt, which is taken on by businesses to finance operations or expansion, consumer debt is tied directly to household finances and everyday spending.

Why is Consumer Debt Recovery Becoming More Complex?

Consumer debt is often unsecured due to financial hardship, so consumer debt recovery companies deal with higher risks. If individuals experience a drop in income, job loss, or unexpected expenses, they may find it difficult to maintain regular repayments.

• Economic Conditions

Australia’s economic backdrop has seen lasting effects since the pandemic, with inflationary pressures, higher interest rates, and many households struggling to maintain cash flow. As of the 4th quarter of 2024, the ratio of household debt to income was around 182%, driven primarily by mortgage debt. Many consumers are financially stretched with less disposable income to make debt repayments, increasing the likelihood of delays. 

Dealing with this requires more than just customer service. If financial hardship increases over time, consumers are vulnerable to insolvency, which can cause their debt to no longer be due and payable for the duration of the insolvency process. In the June quarter of 2025, 3,179 new personal insolvencies were reported in Australia, which is a 7.9% increase compared to the same period in 2024. 

• Industry Pressures

Beyond regulation and consumer hardship, the debt collection industry is changing in ways that add to the complexity. Valued at approximately $1.2 billion, the sector is facing a tighter supply of debt ledgers as financial institutions adopt more conservative lending practices. This limits the availability of recoverable debt and pushes debt collectors and their agencies to prioritise higher-value cases, which can leave smaller debts unresolved. 

Strengthen Recovery Efforts with Bluechip Collections

In the long term, the complexity of consumer debt recovery in Australia is unlikely to ease. Commission-only debt collection models have become increasingly common to relieve the burden of debt recovery, as companies only pay when results are delivered. 

Bluechip Collections helps businesses stay ahead by delivering tailored debt collection services that prioritise both fast resolution and ethical practices. With no upfront costs under their commission-only model, you only pay when your money is recovered.

Don’t let overdue accounts hold back your financial stability. Call 1300 462 114 or visit our website to start protecting your bottom line today.