Debt buyers have been told to balance both the opportunities and threats of the economic conditions.
Asked at the Credit Services Association Half Yearly Meeting, what the impact of a ‘bad bank' which would buy bad debts from the main lenders would be, Zach Lewy, chief executive officer of Arrow Global, said: "Possibly the prospect of a bad bank might encourage lenders to hold off from selling, in the short term. And in the longer term it might compete against the private sector, but ultimately they will either have to sell the debt on or go down the contingent collections route. So it is really more a question of delay, rather than the removal of these assets.
"Generally I think there will be a couple of quarters where the banks will try to work out what the government wants in terms of debt sales and what they want and then bring these two aspects together into a policy. So there will be a couple of months of stagnation."
Mr Lewy is part of a management team which last month completed a deal to buy Arrow Global, with institutional backing, for an undisclosed sum from US student debt funder Sallie Mae.
Speaking exclusively to CCR he said: "We are delighted to have successfully brought almost a year of negotiations to a close. We are now in an extremely good position, with powerful financial backing, to move the business forward. We have a strong team here and the financial strength to take advantage of some of the opportunities to do good deals which are currently available in the market."
But he warned that some purchasers would struggle in the current climate. He added: "I think there will be some bad events for some firms, the only question is when.
"When you look at the problems for debt purchasers - which incude declining cashflows and overindebtedness - it is not like a train crash where there is a single, sudden event, it is more like a gradual plague. It is not enough to conclude that ‘they are still here, so they must be doing OK'. Look at Citigroup, who were over-levered for years, and this created insolvency risk well before the dramatic incident occurred."