Companies that charge drivers fees for recovering parking ticket debts are operating with an average profit margin of more than 60 per cent, a Government document has disclosed.
The Ministry of Housing, Communities and Local Government (MHCLG) stated that this figure indicates a “market failure”, while the AA branded the margins “disproportionately high”.
Debt recovery agencies are employed by parking operators to pursue payment for unpaid tickets, often adding up to £70 in additional fees per ticket for drivers.
These charges were set to be banned when the then-Conservative government introduced a code of practice in February 2022, but this was withdrawn four months later after a legal challenge by parking companies.
A new consultation document setting out the current Labour Government’s proposed code stated the £70 cap is “likely to be higher than can be reasonably justified” but it is “seeking further evidence”.
It added that recovery agencies have “an average profit margin of approximately 63 per cent”.
This is “comparable to highly innovative companies” despite the businesses involved providing “standard services such as payment plan provision”, according to the document.
It continued: “We therefore do not consider them to be providing significantly innovative services, and as such the high profits may be indicative of these firms having too much control over the market, thereby indicating that there is a market failure.”
Parking operators can take drivers to court if they continue to resist paying for tickets.
The MHCLG said debt recovery agencies would break even with fees of approximately £26 per ticket, if the proportion of those paying was stable.
Jack Cousens, head of roads policy at the AA, said: “The 63 per cent profit margin feels disproportionately high for the services provided.
“This only highlights the need to curb the sector and ensure balance for all.
“There remains an overzealous cohort among some private parking operators where they hand over cases to debt recovery firms for seemingly innocuous charges.”
He added that the ban on debt recovery fees in the original consultation was “the right position” and claimed the latest version “falls short of the mark”.
Steve Gooding, director of motoring research charity the RAC Foundation, said: “The profit margins revealed by the Government help explain why there are now more than 180 private parking firms buying vehicle keeper records from the DVLA so they can send demands to drivers – it’s a huge and profitable business.
“The private parking industry’s failure over time to be more open about its activities is part of the problem and its ongoing reluctance to open its books to official scrutiny shows why ministers must follow through with plans to bring transparency and independence to this sector.”
Recent analysis by the PA news agency and the RAC Foundation found 4.3 million tickets were issued by private companies to UK drivers between April and June.
That was a 24 per cent increase compared with the same period last year.
A BPA spokesman said it “strongly disputes the Government’s profit calculations” and called on it to “publish the methodology behind these figures”.
He continued: “The numbers presented are misleading and fail to reflect the reality of the debt resolution sector.”
He insisted the purpose of debt recovery fees is “not to generate profit but to act as a fair and effective deterrent against deliberate non-payment”.
An MHCLG spokesperson said: “This Government inherited a private parking market that lacks transparency and protection for motorists.
“We share their frustration, which is why our private parking code of practice will drive up standards in the industry and hold parking operators to account.
“We consulted on the current cap on debt recovery fees and will publish our response as soon as possible.”
