Four of the largest debt recovery companies in the UK are owned by private equity companies, and a fifth is owned jointly by a hedge fund and two banks, one of which is HBOS.

The biggest debt recovery company in the UK is 1st Credit, which is owned by Bridgepoint, one of Europe’s most powerful private equity firms. 1st Credit was subject to sanctions from the Office of Fair Trading earlier this year, which said that the firm has caused unnecessary alarm to debtors and criticised the way it dealt with debtors suffering mental health or medical problems.

Lord Oakeshott, the Liberal Democrat Treasury spokesman, said:

“There are a lot of people who are struggling with debts and unemployment. They’re now paying for the private equity leverage boom as the economy pays a price for over-borrowings by these firms.”

Faisel Rahman, managing director of Fair Finance, which offers affordable loans to those with financial problems, said:

“We have seen in recent months a shift in the way these firms approach their clients.  As times get tougher, rather than being more responsive to the real difficulties people face, they are being far tougher.

“Banks lend to individuals through brokers and the debt is packaged up and sold on … My fear is, banks are so far removed they can’t see the impact on their customers.”

Debt collection agencies are being criticised for harassing the jobless and those who are in deep debt, and recently banks who are unsuccessful at recovering their customers’ debts have sold off billions of pounds’ worth of unsecured consumer loans to debt agencies at steeply discounted rates – as little as 5p in the pound in some cases.

The amount of debt passed on to such agencies has more than trebled in the past six years, to £21bn, according to the Credit Services Association, the industry’s main trade body.