Wednesday, 22 April 2015

What’s stopping us from being both fair AND effective?

When it comes to debt recovery, is there a choice to be made between a fair outcome and collecting cash?

By working with consumers even closer than we all do today, and taking a more holistic approach, I believe we can achieve increased debt resolution which, in turn, is wholly compatible with both fairness and results. For example, where people can afford to pay, we should be seeking strategies to encourage more of them to pay. Equally, there may be individuals that can agree to a longer-term payment solution if more time and less pressure is applied. Then there is the subject of waste. If we find that a consumer does not have the ability to pay or they have a genuine reason for non-payment, surely we can save the cost of pointless activities and put our money to good use elsewhere. A fair outcome does not mean simply pleasing the consumer and it shouldn’t mean collecting less cash. In collecting cash fairly, I believe it will also be more effective in the long-run. So, is there anything stopping us doing this today?

I guess there is the matter of who pays for those cases where no cash is collected even if that is the fairest outcome. The favoured commercial model for the industry today is Payment by Results (the results being cash collected). Can this continue if we aim to achieve a fair outcome for all? Can we really ask agencies to invest in a customer care approach but only agree to pay when they collect any cash? So, does a fair outcome mean saying goodbye to commission rates?

Perhaps not. Is the issue the PbR mechanism or what the payment is based on? If cash is not the only desirable outcome, then why incentivise only this outcome? Should we consider paying (and being paid) based on the desired result – the fair outcome? In simple terms, should we pay for what we want?

I can’t help but feel that all this depends on a paradigm shift within the whole industry based on the belief that we can work together to make the debt industry better for everyone; that our industry can be both fair and effective.

By Charlotte Mather, Head of Third Party Commercial, TDX Group

Tuesday, 10 March 2015

Recycling…is it the future or a load of old rubbish?

In my last blog I talked about waste.

Like most households today, I have multiple receptacles in which to place my household waste. (And  I have the weekly ordeal of trying to remember which bin to put out for collection – is it the green bin or the grey one this week? And, why on earth, in Nottinghamshire, is the recycling bin the grey one and not green? But I digress …) 

In our personal lives, we all now accept that recycling is ‘the right thing to do’, which got me thinking about recycling in the world of debt collection. Do we need to be more discriminate around what gets recycled?

In the world of collections and recoveries, recycling means that if one debt collection agency is unsuccessful at recovering the debt, the account is passed to another agency to have another go; a single account can be recycled many times. 

What value can that process really add? Perhaps the value comes from additional data is used to make contact? Maybe, it is down to a different approach being taken by the agency to engage with the customer. Shouldn’t we assess the impact of the previous activity and decide how best to manage that account through the next stage of recoveries? Perhaps there are times when the value would be in not recycling. For instance, if we know the customer is having short term financial difficulties, isn’t it fairer to cease action until the customer is in a better position to pay, rather than to recycle the account? This is where customer journey information becomes valuable in not only ensuring the correct treatment of accounts but also to identify where it is fairer to stop pursuing the debt. This helps to reduce wasted effort, costs and ultimately is better for the customer.

One thing is for sure, recycling certainly shouldn’t be all about applying additional activity of the same type. We all know what Einstein thought about doing the same thing over and over again!
TDX Group has a vision “To make the debt industry work better for everybody” and I believe that, at least for recoveries management, smarter recycling is key to achieving that vision.

By Charlotte Mather, Senior Insight Consultant, TDX Group

Thursday, 12 February 2015

Thrown in at the deep end

I joined TDX Group in September 2013 on the graduate scheme, having applied for the job in early 2013.

At the time I was nearing the end of my studies at Swansea University studying business management. I wasn’t 100 per cent sure what I wanted to do – but I have always had an entrepreneurial streak, with my ambition being to either own my own business or to work in a young company where I can help it progress.

This was what appealed to me about the TDX Group Graduate scheme. TDX Group offered a more flexible scheme in comparison to others, and I would be given the creativity to grow according to what I wanted to do and where my strengths and interests lay.

The process lasted a few months with different stages. I initially completed an online application, then a literacy and numeracy test and after being successful in these, completed a phone interview and finally an assessment day. It was a tough day – which is what I expected and the other people were really good – so I left it feeling a little down heartened that I wouldn’t make it through.

However, I found out that I’d been successful in July 2013. I wasn’t due to start until the September – but it was really nice to know that I had a job waiting for me and it was a perfect way to finish university.

I had various discussions with the HR team at TDX Group before I joined and it was decided that I’d start in the Advisory team for an initial eight-month placement.

It was a bit daunting at first adapting to working in an office and doing longer hours than I had been used to, especially because I was thrown into the deep end – but in a good way as it meant that I was able to develop quickly. I started by looking at an internal strategy review and was allowed to take the lead on it, with the security that it was an internal project and support being there whenever I needed it.

I then worked on various external projects after this and my eight months were over before I knew it. During this time I also attended specific courses based on my development needs, like project management and presentation skills.

The Advisory team were brilliant and the time flew by, so much so that I thought to myself that this was the area that I wanted to work in – but now coming to the end of my second placement with the Commercial team, I really don’t know!

I’ve spent eight months in the Commercial team but am hanging around for another couple to help with capacity in the team. I’ll soon be joining the Debt Collection Agency (DCA) management team for a few months, after which I’ll have ‘officially’ completed my two year graduate programme.
When I reflect on my time here so far it makes me realise how much I have learned in such a short space of time – 16 months ago I never would have thought that I’d be fluently using acronyms such as IVAs, IPs and DCAs, but I am now. I remember when I first joined, I had a four-page document that I kept adding to whenever I heard an acronym used in meetings, I wouldn’t say that I don’t refer to it from time to time, but definitely less than I used to!

It’s really open as to what I can do once I have officially finished the scheme – it obviously depends on what kind of roles are available, but I’m able to keep my options open and control my career here. It is a genuinely exciting time to work for TDX Group and I’m very fortunate for the opportunity.

By Ben Dalton, Commercial Coordinator (Graduate Scheme)

The graduate scheme is open until Monday 16 February. What could your future at TDX Group look like?

Thursday, 29 January 2015

Card processing costs could double in 2015 for UK debt industry

For many years the European Commission has been signalling its desire to regulate ‘interchange’ – the fee paid between banks for processing card payments – which is typically passed on wrapped-up in the fees paid by the merchant who takes the payment. 

In 2013 the EU decided to cap interchange costs at 0.3% for credit cards and 0.2% for debit cards and this is now being implemented for all domestic card processing during 2015. Although this cap applies only to the rates paid between the banks, with merchants always paying an additional margin or fees on top, clearly the EU is hoping some of the reduction will be passed on to merchants. Estimates suggest this could total a £1 billion annual saving for UK merchants and as much as €10 billion across the entire EU.

This should be good news shouldn’t it? Not so fast - there are some clear winners and losers. 

Whilst credit card processing fees are expected to fall, the position with debit cards is more complicated. Debit card processing is typically a pence per transaction fee, so in response to the % cap it’s anticipated most if not all UK acquirers will switch to a predominantly %-based fee. This might be good news if you take lots of smaller payments, but not so much if you take larger payments. Roughly speaking merchants taking payments for less than £35 will pay lower fees, but transactions above £35 will pay more.

And that’s not all.

Payments taken over the telephone (classed as ‘customer not present’ or CNP) will be deemed non-secure, even when the AVS/CVV2 numbers are captured, and will be subject to an additional charge.

So, what does this mean for the UK debt industry? The debt industry’s card processing is predominantly conducted over the telephone (90%), mostly debit card (95%) and an average transaction value typically between £50-100. On that basis, it is quite possible that most UK creditors and debt collection agencies card processing costs could double.

The one small positive is when these changes are implemented merchants are likely to have the opportunity to switch providers, even if they are within an existing contract period. So my advice for merchants is to use this opportunity to shop around for the best deal and see whether some of this increase, which you can’t avoid, can at least be reduced by switching to a cheaper provider.

By Sajid Hussain, Business Development Manager, TDX Group

Friday, 23 January 2015

Should debt collection agencies certify to a security standard?

At TDX Group, we’ve chosen to certify to ISO27001 – the international standard for information security management – so clearly we believe this is a critical investment that reflects our commitment to data security. However, for smaller businesses, such as debt collection agencies, do the benefits justify the cost and operational overhead? Or, are there other options?

I guess the place I start is ‘why certify’ at all?

Data security is an ever higher priority for businesses as continual international debate on privacy and the endless list of data breaches makes customer trust increasingly difficult to maintain. So, being able to show consumers and customers that you’re subject to regular independent audits on security can earn or retain customer loyalty, set your organisation above competitors, and build trust in your brand. In short, certifying is no longer an optional extra, it’s a ‘must’ and a regular independent audit is a key part of making sure that data is being handled securely.

So assuming you do go ahead and certify, in addition to the few mandatory standards (such as PCI DSS), there are a few important considerations to weigh up when choosing your standard:

1. Global recognition
Very few of the over 1,000 existing standards are recognised (let alone valued) in the world’s biggest markets. Be wary of local or unproven standards which have a much lower impact in other markets, and always aim to utilise third parties who are accredited by a national body (such as UKAS in the UK).

2. Cost
Be sure to compare the cost of certification to the benefits that you can reasonably expect it to bring – such as reducing client audit overheads or attracting new business, as well as mitigating the risk of a data breach. Don’t forget to consider any impact on your existing processes, which may have to change to conform to your chosen standard.

3. Longevity
The rate of change in IT security is often faster than standards can be reviewed and updated. When you’re choosing a standard, you should make sure that it’s flexible in order to allow you to respond to market demands or emerging threats.

4. Scalability
All being well, your organisation will grow over time – choosing a security standard which is designed for small businesses is likely to reduce the initial workload, but may mean that your hard work in gaining certification is abandoned when you lose the ‘SME’ label.

To ISO or not to ISO?

Certifying to a security standard can be an expensive process, particularly with up-front costs such as audits and potentially consultancy support. However, once it’s in place, and with the correct marketing effort, holding a recognised and trusted certification can put your business ahead of its competitors. If adopting ISO27001 immediately is too onerous, using a lighter standard such as the UK Government’s Cyber Security Essentials is a method of reducing the short-term challenge and preparing an organisation for more in-depth and rigorous standards over time.

At TDX Group, our view is that ISO27001 as a trusted barometer for security management, and we strongly

encourage debt collection agencies to certify to this standard using a UKAS-accredited certifying body.

By David Rimmer, Head of Information Security

Monday, 15 December 2014

Compliant? Prove it.

The debt sale market in the UK is entering a new phase as sellers and purchasers all come under the regulation of the FCA. Are you ready?

There have been many regulatory changes over the years. However, the wave of change to come under the regulation of the FCA is set to be the biggest so far for our industry.

Historically, before and following a sale, there was limited interaction between seller and purchaser. The contract stated what the purchaser could and couldn’t do and it was left at that. Over time, sellers – banks in particular – have stepped up the level of oversight. It is now common for audits before and after a sale, as creditors, either for regulatory or reputational reasons, maintain some ownership of the customer post-sale.

So what impact will the FCA have on debt sale? The key difference this time is that the change affects all participants in the market. As with the FSA before them, the FCA takes a principle based approach to regulation. A result of this is that firms have some latitude in how they choose to interpret the requirements.

What is clear is that it’s not enough to have processes and systems in place – you need to evidence that they’re working. Sellers and purchasers are going to have to work even more closely both pre and post-sale to ensure that both parties can gather the evidence needed to satisfy the regulator. For the financial services sellers, this is an incremental change on top of what they have been doing historically to satisfy the Lending Code and the FSA. For others, who are now falling under FCA regulation for the first time a bigger step change will be needed.

Consistency in approach will be everything from a purchaser’s perspective – they interact with a large number of creditors so for efficiency, a market standard would make sense. For all of us who wish to see the currently buoyant debt sale market continue to thrive, our call to action to all parties in the market must be that we work together to look at how we can work collectively to create consistent, high quality information around customer journey post-sale.

By Andy Taylor, Product and Proposition Manager, Debt Sale

Tuesday, 21 October 2014

Ensuring those who can contribute, do contribute

The levels of unplanned, unwanted indebtedness in the UK are increasing. Ongoing welfare reform and continued decreases in real income for the least well-off in society means that a growing number are struggling to meet their financial commitments.

I have been reviewing data captured by TIX, our insolvency management platform which has visibility of over 90% of all personal insolvencies; it reveals that in the first quarter 2010 only 9.2% of IVA proposals were from consumers with more than 50% of their income coming from benefits and pensions. By 2014 this had more than doubled to 23.6%.*

As a result of this financial pressure, consumers are increasingly making tough decisions about which of their debts they can service and we are seeing a prioritisation of private debts over local government debts, due to the perception that private companies, such as banks, will pursue debts with much greater intensity. 

However, in the current climate, local authorities are also having to make their own ‘tough-decisions’ as they try to deal with on-going budget cuts. With the percentage of debt owed to government on the increase, the sooner Authorities address the challenge, the better.

Council tax

Although average in-year council tax collection rates in England are at an impressive 97.4%, the value of the unpaid 2.6% is, however, over £600million per year. The process for recovering this debt has traditionally been an almost exclusive reliance on third party Enforcement Agents (bailiffs). The effectiveness and fairness of the bailiff approach is the subject of much debate and it remains to be seen whether the recently introduced regulatory changes go anyway to address concerns. What is clear is that many of the innovative collection strategies widely adopted across the private sector are not utilised. When we benchmarked council tax collection performance, against that of the private sector, we found that 16 of the top 100 local authorities in England were potentially underperforming in terms of council tax collections when compared to the private sector ranking for their area. Within that 16, five of the top 10 largest local authorities by population had relatively poor actual in-year collections performance relative to their private-sector collections ranking.**

Service lines at a disadvantage

But what about those areas where the use of Enforcement Agents isn’t available? Our experience is that areas such as sundry debt, adult social care, and overpaid benefits are often reliant on internal legal service teams who do not have the resource to pursue all cases. As a result, in many areas, those owing money have learned to prioritise other debts over those owed to the council. Letters are often left unopened and council collectors have little re-course with those who are deliberately avoiding payment. In an environment where creditors are becoming increasingly sophisticated in the ways they compete for every pound, this leaves local authorities at a distinct disadvantage.

Three tips

The work our consultants have done with local authorities who are seeking to improve collection performance in order to meet growing budgetary pressures has found there are immediate and straight-forward improvements which can be made. Our top three tips are:

1. Agencies can unlock value - If your existing collections processes aren’t yielding results, don’t let the debt become old and unworked – think about engaging a debt collection agency, or a panel of agencies. You will have to spend some money, but there will be a net benefit.
2. Bureaux reporting is a proven deterrent - Consider providing credit reference agencies with data about your service users who owe you money. We have found that this alone deters those who can pay but are making an active decision to deprioritise your debt.
3. A full view of the service user and what they owe will transform your approach -   Individuals are often in debt to multiple service lines – a review we conduced of one council’s arrears revealed that 30% of its service users had debts across multiple revenue lines. By working together you can share knowledge and benefit from streamlined approaches. You can also make the experience of dealing with your council more positive in that service users can talk to one person or department about all of their debt.
Paul Fielder, Strategic Account Director, TDX Group

* TIX Q1 2014
** Analysis conducted by TDX Group in August 2013