What’s at the heart of compliant collections?
Published Wednesday, 4th January, 2012
Compliance is essential for your whole business
Finding the right balance between financial performance and compliance within an ever-changing regulatory environment is vital for all debt collection agencies.
One word is, quite rightly, high on the minds of everyone in the collections industry at that moment: and that word is compliance.
Measure for Measure
There is a growing acceptance within the industry that ‘performance’ is no longer simply measured in financial terms; today it is about service provision and, above all, compliance. How you perform in the new regulatory environment – demonstrating a track record in complying with the highest industry standards – has now become critical. Indeed ‘performance’ today is about finding the right balance between financial performance and true compliance, where neither end can be compromised.
Standards are, of course, impacting the way the market works, but the onset of the Lending Standards Board (LSB) and the new Office of Fair Trading (OFT) Debt Guidance have served simply to reinforce what was effectively already happening, although not perhaps universally,and that is the challenge. And with the bar in terms of legislation and compliance having been raised significantly,combined with the unprecedented focus on standards and ethical behaviours within the financial services community, the challenge is going to get greater still.
So what must an agency do to compete in this brave new world that we face today?
The world we’re moving into now demands seamless relationships, businesses who can integrate fully and share the same performance drivers and results. Clients are looking for agencies who see themselves as part of the solution – an extension of their business as opposed to a bolted-on, third-party provider. And being part of the solution means seeing compliance as an enabler rather than an inhibitor to business.
Indeed this is an important point: compliance is not a ‘nice to have’; it is an essential that needs to be embedded within an organisation and its culture, permeating every facet of the business from recruitment to remuneration.
It has always been my view that, as a business, you have to be compliant by inclination; it is not something that can be imposed on people in an ad hoc manner. In this sense inclination means “walking the walk” not just “talking the talk” for many years now we have included compliance measures built into our collectors’ bonus structure so that they are rewarded for being best-in-class and arriving at the most appropriate solution.
Continuing this theme, within the lewis group we talk about a continual performance review – the need to outperform our own results; to outperform industry standards; to outperform the competition. We talk about the need to be slicker in our operation, and more efficient and effective in its performance. Again, these are elements that are driven by client demand, but need to be part of an agency’s culture.
What has also become clear in recent times is that the habit of making assumptions based upon the old way of doing things is no longer viable: the ‘one size fits all’ model no longer suits, and new, more imaginative and more innovative collections tools and techniques need to be embraced. Agencies need to challenge what has gone before and what people currently think: services that might previously have been ignored because they appear not adhere to the principles of Treating Customers Fairly (TCF) need to be re-examined. The role of doorstep and litigation, for example, need to be better understood.
Dispelling myths
Indeed this is another important point: there is often a prejudice against litigation and doorstep, but the simple fact is that they are at the heart of compliant collections. There are many people who never respond to letters, and when you do not have a contact telephone number a doorstep collector allows you to make contact and better understand the customer’s individual position.
Dealing with customers face-to-face is nearly always the best way to handle such cases in an understanding and compassionate way, but of course it is not inexpensive. The industry, therefore, needs to make a decision whether it wants to do things right, and genuinely treat its customers fairly, or do it ‘cheap’, in which case it might not.The emphasis in TCF is to create a two-way dialogue where you listen as well as speak, and doorstep allows you to do that. There is also the irony that in many cases, not paying for a doorstep visit from the outset proves a false economy: creditors are not saving cost, they are simply putting off the cost, and the collections, until later.
The same prejudices exist with litigation. I am sometimes asked if there is still a place for it in the industry, to which my answer is: why should there not be? Many customers arriving at a collections agency are in denial about their situation. That is not in anyone’s interest, least of all their own. Litigation is therefore not just about getting a judgment; it is also, as with doorstep, about creating a dialogue and establishing a properly considered payment plan. It is targeted at the won’t pays as opposed to those who cannot pay.
What has also changed in recent times is the industry’s thoughts around technology, both at the ‘front’ and the ‘back’ ends of a business.
The role of technology in enabling customer data to be segmented, and therefore allowing different collection strategies to be deployed to suit different debt ‘types’, is now much better understood and is indeed absolutely fundamental to collections performance. This is an area in which the lewis group has particularly invested in recent months – implementing a new customer segmentation and scoring product.
Technology is also driving greater efficiencies. Interactive Voice Messaging (IVM), for example, enables agencies to trigger more calls into the business, and using technology to facilitate easier, more convenient payments is also to everyone’s advantage. (Historically, the lewis group was one of the first to introduce credit card payments and we are now opening up a new payment portal, which will facilitate a very broad range of channels , such as PayPal and PayPoint.)
Such changes within the industry have been a catalyst for change within our own business. In certain sectors and to certain audiences, the lewis group is a well-known and well-respected name with a proven track record over three decades. Indeed we continue to perform well in what are challenging times.
But there are others who perhaps do not know us so well, and we could be doing more to tell them about us since we believe we have an exciting and vibrant story to tell about how we are doing things differently.
We have spent the last 12 months, therefore, investing more in our capability, capacity and our people, and feel confident that we are where we want to be. We have recruited, for example, senior executives in all key areas – Risk (Dan Betts – Head of Risk), Compliance (Joanne Pearson – Head of Compliance) and Sales (Matt Subert – Sales Director) – significantly strengthening our management team. Indeed we believe we have one of the strongest management teams in the industry.
We have also invested substantially in our infrastructure and IT, so that we have a robust and credible offer to the market that stands closer scrutiny.
When people think of the lewis group today I want them to think that here is a business that doesn’t stand still – that is flexible in its thinking and constantly innovating - reviewing new ideas, services and technologies - and investing in the ones we think work best to create bespoke strategies, tailored to different debt types, from primary debt through to trace and collect.
I also want them thinking that here is a business where the culture is all around treating our clients’ customers with genuine respect, and helping them out of financial difficulty, not just because we have to, but because we want to.
Certainly the focus of the new lewis group today is on the contingent market but that does not mean we are no longer looking to purchase debt. Although portfolios are being sold, we believe current prices are unaffordable. We have seen what happens when the industry stated to overpay and it would be a great shame if it went the same way again. We are in a position to bid, with a partner rather than funding ourselves, but the prices have to be right.
Further change within our industry is of course inevitable. Larger agencies will have to innovate to compete; smaller agencies may struggle with the levels of investment required.Scale will be increasingly important, whilst still being flexible enough to adapt to changing environments.
What will not change, however, is the need to perform, and outperform wherever possible. But how performance is measured will adapt to client need. Some will want you to be appearing within the top of their league table within months of an appointment, and a few early settlements can make you look like a world beater. What this can do, however, is disguise real underlying performance.
I think measurement should be about having a balanced scorecard: short-term results should never be at the expense of longer-term performance, and certainly never at the expense of compliance and TCF. Actually it’s about working smarter and harder, and demonstrating how working smarter and harder brings results.
Article featured in January 2012 issue of Credit Collections and Risk (CCR) magazine.