Both statements can be true: eliminating debt collection would massively curtail the availability of credit, and excessive credit availability practically any motive to curtail costs.
This is not true based on the amount of money originating lenders get when the sell off bad debt. Generally they receive less than 5%(sometimes less than 1%).
To the original lender, 5% of the defaulted debt generally just covers the cost of writing off the debt and maybe a bit more. It does not move the needle at all for loan availability.
That’s true once you get to the point of selling debt off. More effect would be seen if the ability of creditors to pursue debtors earlier in the process was more severely curtailed.
To the original lender, 5% of the defaulted debt generally just covers the cost of writing off the debt and maybe a bit more. It does not move the needle at all for loan availability.