How proposed EU data protection changes could impact your business in 2014

In this two-part post our Head of Information Security and Data Protection, David Rimmer, looks at the major changes proposed in the new EU Data Protection Regulations. We believe that smarter use of richer customer data is at the heart of ensuring fair treatment of consumers in financial arrears – so it’s important that businesses keep up-to-date with proposed changes to ensure that they improve the customer experience and do not breach data protection laws.

In 2014, MEPs will vote on the proposed EU Data Protection Regulation in order to make data protection legislation across the EU much stronger. What practical steps can you take to prepare?

Benefits

The main benefit to UK business should be the harmonisation of data protection legislation across the EU, replacing the wildly different interpretations of the current EU Data Protection Directive currently in place in different countries. Not only should this make offshore processing, exports and expansion more straightforward, but it should place UK organisations on a level playing field with their continental counterparts in terms of the overall burden of compliance.

Penalties

The main topic of discussion is undoubtedly the significant increase in potential fines. Initially proposed at the greater of either 2% of the company’s global turnover or €1m, the potential fine has skyrocketed to 5% of global turnover or €100m in the new draft. It’s worth noting that the UK Information Commissioner already has the power to fine organisations up to £500,000, but since being granted this ability in April 2010 the highest fine has been £325,000 – well below the maximum permitted under the current law. This increase is a clear attempt to make data protection and privacy a board-level issue in all organisations.

Cheap will no longer be an option

The increase in potential fines threatens to undermine the cheap and ubiquitous nature of internet-based systems – particularly when combined with another change in the proposed draft, which puts more responsibility (and culpability) on suppliers (data processors). After the regulations come into effect, free or advertising-subsidised cloud-based systems just may not be viable as providers reconsider their business models to take account of the magnitude of fine that could be received should there be a breach of security. Additionally, the geographic scope of the regulations will now expand to include any organisation offering goods or services to consumers (data subjects) in the EU. So, cloud providers, no matter where they are based, will now have to build the costs of complying with the new regulations into their cost model and operating procedures.

New roles

The draft proposal also mandates the appointment of qualified data protection officers for organisations that process more than 5,000 personal records in a year, and requires that the officer reports directly to the company board in order to provide a degree of independence. The officer must also be appointed for a four year term, though this is reduced to two years if an external organisation is used to provide consultancy support in place of an in-house expert.  There is currently no detail of the level of qualification required to fulfil this role, and places on such courses are likely to be in high demand once the requirement is clarified.

How can you prepare?

Though the Regulations are still to be approved, it seems overwhelmingly likely that the changes outlined above are going to arrive in the near future.  In order to prepare, here are some steps that your organisation can take today:

• Understand what data you hold, where it is stored and how it is protected – ideally document this in an information asset register to allow you to maintain a list of how your data is controlled, used and shared over time
• Include an assessment of privacy impacts and the concept of ’privacy by design’ in new projects (this will be discussed in more detail in a future post)
• Review overall compliance with the current Data Protection Act, remembering that security is just one of the eight principles – the ICO website has a useful guide to your obligations
• Ensure you have an adequate level of data protection expertise available to support your current operation, as well as in planning for transition to future legislative changes - ideally within your organisation to avoid an increase in demand for external consultants as the implementation timeline approaches
• Review your reliance on free or subsidised cloud services, and ensure that any future changes to pricing based on compliance with the EU law can be built into your operating model

In my next post, I will look at the impact the remaining changes to the law (including the ‘right to be forgotten’, breach notification timelines and the introduction of a data protection certification) will have on businesses.

David Rimmer, Head of Information Security, TDX Group

The growing voice of the customer – The CFPB complaints database

Continuing our US theme, Chris Smith discusses the growing voice of the customer and the use of the US regulatory body's database.

One of the interesting side effects from the social media revolution of the past three years is the power that social media has given to the consumer and the challenges that this has caused for business. Poor treatment of customers can no longer be swept under the carpet by large corporations claiming it as a small error impacting only a handful of customers. A great example of this would be the challenges faced by Blackberry earlier this year. The organization initially tried to down-play the scale of the issues being faced but the consumer uprising across social media networks quickly highlighted the size of the problem. This just highlights how customer voices in aggregate can now be much louder than the brand itself.

We’ve seen the same trend recently across the debt collection industry where the customer’s voice is now being heard, loud and clear. The CFPB’s latest innovation, their consumer complaints database, has recently released details on the debt collection complaints that have been made since July; this database now contains in excess of 8,000 complaints and is growing at over 200 complaints per week. These directly identify the creditor, debt buyer or collection agency involved and the cause of the complaint; furthermore, this information is now publically available for all, including the regulators themselves, to see.

It is becoming ever- easier for customers to raise complaints direct to regulators, through the existing consumer complaints portal and the upcoming ‘hotline’. As such, we anticipate the volume of high level complaints to grow significantly through 2014, indeed since the release of the database the number of complaints being sent to creditors per week has steadily grown by 5% each week, so doubling every 15 weeks. So, what does the industry need to do in response to this to slow this trend?
We believe that there are two broad strategies that the industry needs to focus on; mitigation and harvesting:

• Mitigating complaints at source can be achieved by putting the customer experience at the forefront of the agenda. This means not only “ensuring adherence to regulation” but analyzing and improving the customer experience at all touch-points within the collections lifecycle.

• Harvesting complaints internally will prevent the escalation of disputes and issues into high level complaints. This means ensuring all disputes are responded to in a timely fashion and even encouraging customers to complain directly to you to enable any challenges to be resolved directly.

One major learning from large corporations’ reaction to the social media explosion is that listening is crucial and can provide far reaching benefits. Given this emerging voice in our industry, we now need to ensure that we are not only listening to regulators, but also listening hard to our customers.

Chris Smith, TDX Group

How does technology ensure compliance?

As part of our series on compliance, Patrick O'Neil discusses how technology can ensure compliance.

These days consumers  expect instant access to information, wherever they are. Whether on their desktop or, increasingly, on their smartphone, the answer to any query is only a Google away. This doesn’t generally stop at football scores and celebrity  birthdays, the average consumer has become accustomed to having real-time access to a range of far more useful (if not as interesting) data, such as their bank balance, energy usage and remaining mobile phone minutes, all of which  help them manage their day to day lives.

This doesn’t change once a consumer begins to struggle financially. Understanding, and being able to take advantage of, the technology solutions available in the debt industry provides an opportunity for debt collectors to improve performance and drive a more positive consumer outcome.

Reaching the right person when you contact them, a Right Party Contact (RPC) in industry parlance, is precious and shouldn’t be wasted. We all know that when a consumer raises a query the call can go one of two ways, and a delay in answering queries can risk losing customer engagement and damage the potential call outcome. If it takes a week to provide a copy statement you might never hear from that consumer again! On the other hand, providing the answer to their question, whether through giving the consumer  easy access to the right data, having the data to hand yourself, or by being able to provide actual bills and statements in real time, can make all the difference. Studies have shown an over 10% improvement in cash collections when copy bills are instantly available, and being able to discuss the specifics of the account during the first phone call leads to greater clarity and faster resolution for the consumer.

Consumers expect the person they speak with to have the answers to their questions. Proactively providing this data to the collectors on the front-line should be the norm and be viewed as a performance driving tool, not an afterthought and an operational burden. Doing so will drive the best outcomes for both creditor and consumer.

 

By Patrick O’Neil, Head of Pre-Sales Consulting, TDX Group

 

TDX Graduates: The “Eric the eels” of the debt industry

Having completed my first month as one of the new graduate trainees on the rotational scheme at TDX, I feel like the time is right to write a blog about my experiences to date. After a bit of thought, I felt there was only one thing in my mind that I could write about - being thrown in at the deep end in a fast paced world; immediately learning a lot and contributing to the organisation.

Analogies of Michael Phelps jumped to mind, but at this point I could hardly compare myself to the best in the field. Instead I thought back to the Sydney Olympics in 2000 and a man called Eric Moussambani, better known as Eric the eel, who represented Equatorial Guinea in the 100m freestyle. A man with little experience compared to the others around him, yet given plenty of responsibility, really resonated with me in this instance, as that was me in September.

Fresh out of Swansea University I joined the TDX advisory team, with limited experience. Within days of starting I had been given my first project, where I would take the lead reviewing an internal process with support from other members of the team – whose help was invaluable.  Their friendliness and willingness to help was surprising, especially to someone who had a more stereotypical  impression of what life would be like in a successful and growing business.

Initially my reaction was to question my own ability, and whether I would meet expectations. I won’t lie, the task was hard and I felt some pressure as, at the end of the day, the responsibility fell on my shoulders, but I worked hard at the project and the helpful nature of everyone that I came into contact with meant that I could draw some interesting and helpful conclusions.

As a graduate, this approach of immediate involvement and responsibility has great benefits. I already have an appreciation for how I am supporting the wider business in achieving its goals, and I am developing my skills from day one and learning a great deal.

My key learning from this is that in a fast paced, growing company like TDX everyone is given opportunities and a chance to shine from day one, much like the wildcard draw designed to encourage developing countries without expensive training facilities. Like Eric the eel I surprised myself with the success I achieved. Although his success had a huge element of luck, mine was driven by both hard work and support from a great team.

Ben Dalton, Graduate Trainee, TDX Group.

See more about the Advisory team here.

C is for Compliance

I often wondered whether my name, Chetan, has any specific meaning. This also led me to think why my parents chose to begin it with a ‘C’……..but I’ll come back to that part later……

The debt recovery industry has many links to the letter C. In recent times, the compliance journey our industry has taken - from the development of the Consumer Credit act, the generic Compliance Codes and Standards we operate under today and, more recently, the onset of these principles turning into rules that protect Customers and Conduct expectations. Debt Recovery businesses must manage Consumers fairly. Not managing Compliance properly can lead to specific cause and effects – whether that is on Collections and/or Complaints……….Is your tongue twisted yet?

So, how can Creditors do this? Traditionally Call monitoring ensured Compliance, but nowadays this has been augmented by technology  – if you have a Complete view of your Customer you can tailor your strategy to their Circumstances . That allows you to recover more of their debt, at a time and in a way which is suitable for them, and ultimately leads to happier Customers and improved debt recovery (otherwise known as Compliance). 

That sounds great, you may say, but understanding my Customer’s Circumstances isn’t easy. Actually it is now easier than ever-before.

The growth of systems and technology which allow you to segment your Customers better than ever before has been rapid. Data exchanges, data appends, online payment channels, flexible payment channels, Customer journey data, online data portals……all these systems are relatively new and are transforming the industry. We can now ensure that the most appropriate treatment is applied to each Customer at the right time, to maximise positive outcome and therefore liquidation.

Knowing more about individual payment behaviour and Circumstances also enables debt collectors to tailor their conversations by acting as a guide to help the Customer make an informed decision on the best outcome to resolve their situation. 

However, we must remember that data is only good if you use it well. Having the ability to execute and the flexibility to constantly enhance your debt collection strategies as you learn more about your Customer is key to maximising both financial and Customer experience performance.

Now back to the letter C. In Hindu Sanskrit naming culture the parents choose a specific letter of the Sanskrit alphabet which is associated with the baby’s lunar birth sign and which is supposed to be lucky for the child. This is defined by the child’s date and time of birth and the baby is then given a name starting with that letter. Mine happened to include the letter C……and there I have my answer. I was named Chetan and so it seems my parents had chosen my career path for me - from a very early stage. I was destined, it seems, to work in the world of Compliance !! There are various translations of the name Chetan, including  "Perceptive", 'Spirit Full' or 'Full of Consciousness'. And there you have it, key skills and associations that we use today to manage compliance in our industry.

By Chetan Patel, Compliance Manager, TDX Group

How innovative thinking can turn data processing risks into business opportunities

Data, it’s everywhere isn’t it?! Every time I pick up a newspaper or surf the web I can’t seem to avoid stories about data (albeit usually about something going wrong or getting lost!).

The amount of data created or exchanged in the world has grown exponentially over the past decade. In fact, 90% of all the data in the world has been generated over the last two years! **
So it’s hardly surprising that the systems and processes to manage that data have to continually adapt to keep up with demand.

It’s no different in the debt industry. As TDX has grown over the past few years, so has the amount of data that our operations teams have to process - a great thing for any business, but a nightmare if we were to get it wrong. We have extremely high standards regarding the ways in which we treat our clients’ data, after all, their data represents people’s lives.

Our TIX (The Insolvency Exchange) operation manages 20,000 accounts on a monthly basis to complete account balance validation, commonly known as the Proof of Debt (POD) process, for our clients. Traditionally we have exchanged this data with clients on spread sheets via email, but we’ve always thought that there had to be a better way to achieve this data exchange, so we put our thinking caps on and came up with a new product.

Proof Of Debt Online (PODO) takes advantage of our existing portal technology and allows our clients to complete the POD process through an online interface. Not only is this a revolution for TIX and our clients, but it also represents a step change in the IVA industry for data exchange.

We launched PODO in July 2013 and now have seven clients using the platform. Since then our own data, as well as client feedback, has told us that PODO improves:

1.  Speed: PODO is twice as fast as using spread sheets (no surprises there!)

2.  Security: less people have access to the data now, as the client uploads it to the portal themselves, and this enhances security

3.  Flexibility: as PODO prioritises work based on which balances need confirming most urgently, and gives a better view of all work outstanding, colleagues can be utilised more effectively

4.  Data integrity: this has improved significantly, and with PODO allowing instant access to quality assure data that has been entered by an individual user, mistakes can be spotted and fed back quickly and effectively

5.  Treating Customers Fairly (TCF): data is transmitted much faster (no waiting for a spread sheet to come through) via the portal and so clients are able to mark accounts as insolvent much sooner, therefore removing them from collections queues and ensuring confirmed balances are accurate

6. Performance data: PODO captures data by individual user, allowing 'super users' to have a plethora of data on team performance

We’re delighted with PODO’s performance. What started out as a way of improving data security and streamlining processes, has been achieved with imagination and innovation and has created a platform that will fundamentally change the way data is exchanged for TIX clients.

By Richard Payne, Head of Operations, TDX Group.
See more about PODO here.


** http://www.sciencedaily.com/releases/2013/05/130522085217.htm

An apple a day: The pro-active approach to managing ever-changing regulations

The phrase “an apple a day, keeps the doctor away” was made famous by Benjamin Franklin, this outlines the benefits of taking a pro-active approach to your health and not just waiting for the doctor to give you a cure when you are sick. Exactly the same principle applies in today’s compliance-led collections environment where pro-activity will help to keep the regulators at bay.

The regulatory-driven approach of the US market provides issuers with a clearly defined set of regulations that must be followed; these are then rigorously enforced with severe consequences for failures, as exemplified through a number of recent high-profile cases. This approach has resulted in issuers being solely focused on meeting current requirements; they then await the next wave of regulations and respond accordingly. As such, the compliance agenda tends to be driven by the regulators, with issuers facing challenges in keeping up with ever-increasing requirements.

In a world of pro-activity regulators provide guidelines which issuers then interpret and adhere to. Although this may appear to provide less clarity and room for uncertainty, when applied correctly, this model results in issuers building an ingrained approach to ensuring the fair treatment of their customers rather than just meeting requirements. The key benefit for creditors is that they no longer need to react to growing regulation; instead they define it through their actions.

How do creditors become pro-active, by responding to, and having their own interpretation of, guidelines, rather than awaiting the regulators to impose changes. In our world of late stage collections this means reacting to growing guidelines around the management of third party debt suppliers, and utilizing the techniques we developed over the past 10 years to monitor performance, such as detailed monitoring and exception management, to now monitor compliance. Further to this, we can develop audit and compliance activity by focussing on policy and processes to ensure that these are being followed through account level auditing.

With this approach to compliance the industry can work with regulators to understand the pro-active ‘apple’ required to keep the ‘doctor’ away, this in turn will help to define future regulation and  ensure that issuers are well positioned to meet future requirements.

By John Telford, CEO - North America, TDX Group

Compliance: why should we do it, and how will it change our industry for the better?

In the second decade of the 21^st century compliance is the new king. Markets are changing fast across all consumer-facing industries with regulatory forces becoming increasingly influential and customer service expectations rising.

Within the current complex and changing economic environment creditors face a tough challenge balancing the increasing pressures between delivering greater levels of liquidation, reduced cost to collect and a more compliant and customer- centric manner.

Over the last five years I have noticed a shift in how companies manage their compliance agenda as the importance of this has increased to be on a par or, in some cases, even more important than recoveries liquidation.

With the increased media and regulatory scrutiny around debt collection practices and the recognition that it can cost more to acquire a new customer rather than keep an existing one, (even one that pays late or who has hit financial hard times) companies have been forced to react to ensure they are doing more than simply ticking boxes and following best practice guidelines. They now need to base their compliance performance around 'outcome' and ensure that they find the right one for all parties, including the debtor.

So, against this tide of customer-centricity, what knowledge do we need to ensure compliance in everything we do? Do we need specific systems and technology? And is it actually possible for companies to increase collections, reduce costs, be compliant and improve customer experience all at the same time?

These are all key questions facing today’s industry managers and ones which we would be well advised to understand as soon as possible. In this blog series we attempt to answer these questions, and clarify what we all need in this fast-paced and ever-changing world.

By Beth Whelan, Senior Client Relationship Manager, TDX Group

Why Local Authorities need to plan now to mitigate the impact of the upcoming changes to bailiff regulation

It is the opinion of the Ministry of Justice that ‘Bailiffs are necessary for both the economy and the justice system. They carry out a difficult role in often challenging circumstances, and the majority operate in a responsible and proportionate manner. However, a significant few use intimidating behaviour, treat debtors unfairly and cause unnecessary distress, destroying the reputation of the majority. The Government is committed to strengthening protections against these rogue bailiffs and the unsound, unsafe or unfair methods that they use, while at the same time making sure that debts can still be collected fairly’.

It is for this reason that the Government is introducing new measures in April next year to clarify the law, introduce a transparent fee structure and regulate the industry. The implementation of Part 3 of the Tribunals, Courts and Enforcement Act 2007 (TCE Act) scheduled for 6 April 2014 is, amongst other things, going to set into statute the fees that bailiffs can charge.

Based on the proposed fee structure, and some assumptions around inflation and VAT, I think it is fair to assume that the fee for a single bailiff visit after 6 April 2014 will be around £400 (administration fee plus enforcement fee). This is significantly higher than the fees currently contracted by local authorities for a single visit and will be considered disproportionate by many publicly elected councillors. So, whilst, in the opinion of most, the increased regulation of the enforcement industry is long overdue, these changes are undoubtedly going to have a significant impact on how local authorities recover arrears in a number of crucial revenue areas. At a time of funding cuts, welfare reform and increased scrutiny, councils would be well advised to start planning now to mitigate the impact of these changes.

However, I believe councils can take comfort from tried and tested techniques already in use in the private sector and, as a result,  these changes could actually result in increased recovery rates, improved internal efficiencies and a reduction in the total bailiff fees charged. The key is the administration fee stage. If councils can provide the right information and motivation to enforcement agents to collect at this stage, then time to collect should shorten, fees reduce and the customer experience improve.

For some years now private sector creditors have been implementing increasingly sophisticated debt recovery strategies designed to maximise collection rates whilst at the same time adhering to Treating Customers Fairly (TCF) principles. Many of them have similar challenges and processes to the public sector; there are some particularly strong parallels with the water sector, for example.

A debt recovery strategy that includes data enrichment to improve access to contact details, alongside a better system of matching and managing enforcement agencies, could help  free up resource, improve performance and limit fees.

Adopted from the private sector, a new breed of tools and services are finally allowing councils to implement and execute strategies suited to the unique circumstances and goals of local government. This could include managing enforcement agencies in a manner that incentivises them to collect at administration stage rather than letting cases escalate to the more expensive enforcement stage. What is more, with the right tools in place, strategy becomes an iterative process allowing councils to test and learn, continuously improving and reacting to an environment that is, by its very nature, constantly evolving.

In the present climate local authorities are dealing with significant change. Unprecedented funding cuts, welfare reform and regulatory change all combine to make an extremely challenging climate. But there are also opportunities. Enterprising authorities are finding imaginative solutions that mitigate the changes and improve their position both today and for the long term.

If you would like to be sent our White Paper on this topic, or would like further information, please request more information here. 

 


Paul Fielder, Strategic Account Director, TDX Group

Greater visibility: supporting both strategy and compliance teams

Being an analytical company we have long obsessed about gathering and utilizing data to drive improved performance, while ensuring it is always aligned to the changing focus of the industry towards regulatory adherence. We now see this same data helping to improve compliance.

Our Head of Compliance Management, Chetan Patel, and Lead Strategy Analyst, Rupert Wood, discuss the benefits of greater visibility of account level supplier activity.

What first interested you in gathering account level supplier activity data? 

RW – We started gathering account level activity data over five years ago on portfolios where we defined and managed the agency strategy on behalf of creditors. Our initial objective was to really understand the drivers of liquidation. Understanding the data better enabled us to modify our approach based upon the activity deployed by the agency, for example, by seeing that an agency’s collections strategy stopped after 90 days we were able to re-call accounts early to ensure they continued to be effectively managed through their lifecycle with no delay.

CP – We soon followed suit in utilizing this data as part of our audit and compliance activity, again with the first step being to use this new found visibility to target specific accounts. We could suddenly focus our audit activity on accounts where things were actually happening, and no longer review hundreds of accounts with no activity to find a small number where real contact was made.

Has this approach changed over time?

RW – The next step in our journey was exception management, this enabled us to immediately identify exceptions to process; for example when activity levels dropped or were missed on batches of accounts. We used this in conjunction with our agencies and were able to support them in identifying exceptions to their process, a great example being when we were able to directly identify the benefits of one agency utilizing a new data append, immediately tracking the increased dialler, contact and therefore liquidation rates, which drove a greater than 10% uplift in performance for that agency.

CP – Exception reporting has once again been hugely beneficial to monitoring an agency’s compliance, I can now immediately identify any accounts which have had, for example, excessive dialling or out of hours calling, I can then target any audit activity to these accounts to understand the root cause. No longer am I reacting to what I find through random account level monitoring but I am able to be proactive and immediately identify issues as an when they happen.

What’s the next evolution in how this information is utilised?

RP – In the age of ‘big data’ we  continue to gather more and more information and utilize this in novel ways to enable us to be truly customer-centric and ensure that the customer journey results in the best experience possible. As an example, there is little reason recycling a customer who has just engaged in dialogue with an agency and has outlined their financial situation, to another agency only for them to have to go through the whole process again. Having this information available to all enables the industry as a whole to tailor their strategies to prevent this from happening.

CP – As the focus across the collections industry continues to shift towards compliance having visibility of what suppliers are doing on accounts will become ever more important. As regulatory requirements continue to grow so will the need for this level of agency monitoring; without the right technology in place to easily obtain, store and access this level of data, creditors will be blind to what their suppliers are doing, presenting a significant risk to the organisation.

How small changes lead to big success

If you were watching the news over the summer you will have seen that Sky pro-cycling did it again, a second Tour de France win in succession. It was considered an outrageous statement by David Brailsford in 2010 when he announced there would be a British winner within five years. Now in 2013 we have two.

If you believe what you read, this achievement has been based solely on marginal gains – a lot of small changes that add up to a significant change overall. However, if you delve deeper into the framework of this success we can identify a number of factors that have contributed to their winning streak.

1. Having a team with the skills and motivation to succeed
2. Understanding what they wanted to achieve from the start
3. Understanding where they were in 2010
4. Putting  a realistic plan in place to see how they could get from where they were to where they wanted to be

It’s also important to understand the ‘aggregation of marginal gains’. Put simply, how small improvements in a number of different aspects of what we do can have a huge impact on overall performance.

So how does this relate to business? Well surely we can use a similar formula in business to imitate the level of success Team Sky has experienced? If we follow the Sky recipe, what ingredients do businesses need?

1. Business goals
2. To be honest and understand where the business is today
3. To have a plan of action
4. To have the motivation to succeed as well as a commitment to continuously develop skills and knowledge

Remember, never underestimate the power of small positive changes; tiny incremental changes add up and make a large difference to the overall whole.

And this strategy doesn’t just apply to businesses; it’s relevant to all processes and teams that operate within any business. Adopting this simple approach will not necessarily guarantee you the success that Sky had, but it may well put you on the pathway to success.

By Richard Anderson, Senior Consultant, Advisory, TDX Group

You can’t build castles on quicksand: the data behind the story

John’s blog last week outlined the importance of the getting the basics right with respect to managing third party collections activity. As the Lead Analyst at TDX for Platforms and Processes, my team’s responsibilities include the development, maintenance and monitoring of exception reporting for portfolios under our management. As such, this article strongly resonated with me and also allowed me the opportunity to reflect on the findings that my team have made through the analysis of over 20 million accounts with a value in excess of $15 billion.

Data gathering: “Visibility drives Compliance and Performance”

• Successful analytical teams will be focussed on analysing data and not just gathering it.

In order to effectively monitor your foundations the key requirement is visibility of all processes. As with buildings this may not be that easy unless you have a well-structured and efficient way of storing, accessing and utilising the data required. Unfortunately most systems are not purpose-built for managing accounts placed with third party collection agencies and hence this information can be near impossible, or at least require significant resource, to gather.

Account Reconciliation: “The Risk and Reward of knowing where your accounts are”

• Up to 12% of accounts are not actually where the creditors thought they were.

The first principle of sound fundamentals is ensuring that each account is being managed by the agency you think it is assigned to. Upon taking over the management of large stock portfolios we see that up to 12% of accounts are not actually where the creditors thought they were. The implications of this are significant; we often see accounts being managed by two agencies at one time which creates concerns from both a compliance and brand risk perspective. This also impacts on performance as large batches of accounts can never reach collection agencies or sit dormant on the host platform for years. The mitigation for this is weekly account reconciliation, and as with data gathering, this process needs to be fully automated and supported by actionable MI to remove the significant resource implication that this can create.

Recycling Processes: “Time affects performance more than creditors think”

• 11% performance impact from delays to recycling accounts

The process required to recycle accounts from one agency to the next in the placement strategy contains a number of checkpoints. Failures or delays are often driven by system constraints which can result in a requirement for resource-intensive manual processes to manage accounts. Again effective monitoring must be in place to ensure that the right accounts are being recalled at the appropriate stage of activity, they are being returned or disputed in a timely manner by collections agencies and they are then recycled correctly to the next agency. The importance of getting this right should not be underestimated as, for example, we have observed an 11% performance impact from delaying the replacement of accounts by one month.

Query and Dispute Management: “Customer Satisfaction, Compliance, AND Performance”

• Quicker resolution drives performance uplifts of up to 40% on disputed accounts*

Queries and disputes present both risks and opportunities. They can be easily escalated into complaints if not responded to promptly and effectively. Conversely, once contact has been made with the customer, query resolution is likely to drive payment. As such, effectively managing queries and disputes needs to be a core focus of any vendor management activity. As a result of the ~1 million queries raised across our portfolios over the past 10 years and the improvements driven over this period, we have been able quantify the benefits. Resolving a dispute within three days rather than two weeks drives a performance uplift of over 40% on disputed accounts. As disputed accounts can drive up to 30% of collections across certain portfolios, this can have a significant impact.

These examples hopefully demonstrate that developing sound fundamentals not only provides strong ‘foundations’ upon which complex strategies can be built, but also drive their own performance and compliance benefits which in isolation can be hugely significant.

*For a recent detailed case study on how these principles generated substantial returns for a large credit grantor click here.

Tom Miller, Lead Analyst Platforms and Processes, TDX Group

Email is dying: are Skype and Facebook the new customer contact points in the debt industry?

Do you remember when email was new? I was seven years old when I signed up for my first email address. Back then, dial up internet on pay-as-you-go was still the normal. I was so excited waiting 30 minutes for my mum to get off  the phone so that I could read the email my aunty sent, or a friend at school. It was like getting mail but a lot cooler, and when I was seven years old I was very excited whenever I received mail in the post...

Now I'm an adult, I have very quickly realised; mail in the post is usually one of two things 1) an advert or 2) another bill to pay... yay...

Now with my iPhone, I carry my email in my pocket, which is great! Except that, most of my emails are now, well, either a bill or an advert - and a lot of websites request an email address in return for a service. You can't buy something from Amazon without having to sign up. Not surprisingly, I get regular emails from them advertising products every week. You may be able unsubscribe from the mailing lists, but most people find themselves fighting a losing battle to do this for every website they want to purchase something from.

Interestingly, the use of email as a form of communication between family and friends has declined massively since its heyday a few years ago. Even landline phones seem almost outdated now, everyone uses mobiles and the only people who call me on a landline are telesales…

These days, people use services like Skype and Facebook to keep in touch. They still advertise to us, but it appears in a less intrusive manner. I remember over a year ago I read an article about a technology company that was getting rid of internal email, with the company claiming that only 15% of internal email was useful. This just highlights the fact that we are already seeing a transformation from email towards social networking and instant messaging in the business world as well as in our private lives.

Yet in order to try and contact a debtor, we still focus on phones, addresses and emails...

This has left me thinking - what if we were to target Skype and Facebook instead? Communicating with debtors on a wider variety of channels can only be an improvement - right? But if we do that then how long will it be until people in general stop using Facebook because it’s just a bunch of adverts and bills? And how can we even predict which social networking sites will last? Everyone thought MySpace was going to last forever until Facebook came along…..

I honestly don’t know what the answer is, but as the modern world of communication is so fickle and rapidly changing – surely we should, as an industry, start preparing for the next forms of communication? Or will we just end up following debtors on short-lived sites like MySpace? The phrase “adapt or die” seems ever more relevant these days! Here at TDX we are recognising the ever-changing power of the internet through developing e-collections tools which are  some of the first on the market to make the most of our varied electronic communications methods - but are we prepared to keep ahead of the game, and can we even predict what the game may develop into? This is the modern challenge we all face in business and one nobody yet has the answer to.

Luke Simmons, Tester, TDX Group

Enhancing the auction process – how portfolio analysis adds value in a debt sale

This is the second post in our series that offers 'a fresh view' on the debt industry. They are the thoughts and observations from colleagues who have recently joined TDX Group.

Liz Crosland-Taylor joined TDX Group in March 2013 and works in our Advisory team. Here she shares her thoughts about how a debt sale has similarities to being at an auction. 

For the past few couple of months I have been working in our TDX Debt Sale team. I remember my initial reaction when I was briefed on the debt sale function – confusion, along the lines of… so, people actually pay money to obtain debts?

But quickly, this began to make sense. I see that the function of debt sale has similarities to being at an auction – in fact, purchasers do actually ‘bid’ for a portfolio, or segments of it. But, just like at an auction, how do bidders and sellers ensure they buy or sell the right lot for the right price? I suppose it all comes down to the varying perception of value, and how we can create and maximise it.

One thing that intrigues me at auctions is the mixed lots – a mystery box of china or glassware. These don’t usually have estimates, rarely have reserves, and it’s up to the buyer to establish what the value is worth to them.

However, some buyers might not have the time or inclination to visit and research into the contents of the lot. They may rely on the auction house to have noted one named piece of interest in the lot description, and take a chance with the rest… And they may rely on that named piece being authentic, or request the auction house buy back. Usually, the risk in this situation would result in the purchaser placing a low value on the lot.
It’s these principles and experiences that I see reflected in the realm of debt sale.

I would rather pay a little more for the items that I know and want, and less for a mixed lot that includes items I am not interested in – and an awful lot less when I know very little about the items on sale! I would prefer to avoid overpaying for a lot and realising I have obtained a significant number of items that are undesirable to me. That would cost me – literally – in deciding where I put them and how I get rid of them, and cost me in the time it takes me to do so too. This ‘unknown mixed lot’ can essentially be considered largely unattractive and of low value.

It can be similar in debt sale. Everyone has the prospect of realising greater value when given the opportunity to purchase accounts they are specifically interested in, and have greater knowledge of. When the time and effort is taken to carry out analytics, appropriately segment a portfolio and do sufficient research to produce a detailed marketing pack, it yields strong positive results for all parties.

So, returning to the auction process, perhaps sellers should take a leaf from our book? - become more profitable by segmenting their mixed lots, or spending a little more time researching and documenting the contents, helping to achieve higher prices? But then again, I realise not everyone would have an existing structure or the resource to make that into a viable commercial action. Working in TDX debt sale, I have seen how we provide a service that adds value for both the sellers and buyers of debt – it’s just a shame there isn’t an equivalent for me to take advantage of at the local auctions.

Liz Crosland-Taylor, Consultant, TDX Group

Third Party Collections – you can’t build castles on quicksand

There is a wide array of somewhat tacky quotes about building on solid foundations and chains being only as strong as their weakest link. I won’t bore you by quoting these, but I would like to outline their relevance in managing third party collections activity.

Analytics, data and insight are like 21st century modern buildings: exploring new innovative ways of utilising the above techniques to align collections strategies with customers’ needs, hence improving customer experience whilst driving performance. As with these extravagant new buildings, the importance of sound foundations which underpin the overall solution is often overlooked. The same can be seen in the collections industry where underlying technology is a key enabler of innovative activity, for example:

• Do systems allow for the seamless integration of external data into third party collections activity?
• Can a segmented approach be deployed to ensure that the right debt is supplied to the right supplier?
• Does the introduction of a segmented approach cause fundamental challenges around areas such as account and invoice level reconciliation?

Ensuring that all elements of a process are working effectively is the key to success in any field. As an example, the best quarterback in the world will be ineffective without the necessary levels of protection from his offensive line. Once again, the same is true within an external collections strategy which, even with the most sophisticated strategy with superior suppliers, will be totally ineffective if;

• You cannot be 100% confident in the exact location of all accounts, and hence accounts are falling into black-holes and being un-worked
• You are not responding to queries in a timely and effective manner
• Accounts are not closed and recycled to latter stage placements in an effective and timely manner

As with engineers designing and building new structures from the foundations up, we see that the deployment of effective technology and processes is the key to building and developing an effective external collections strategy, without this buildings (and processes) quickly come tumbling down!

By John Telford, CEO - North America, TDX Group

Purchasers - inconsistent questions, consistent answers

The search to meet new requirements in debt sale

My previous article outlined the thoughts of creditors with respect to the latest challenges within the US debt sale market, namely regulatory requirements relating to the depth of audit activity. TDX Group’s intermediary position within the market also affords us detailed insight into the views of debt buyers around the growing requirements being placed upon them by sellers who are looking to satisfy regulators.

The primary theme from our conversations with US debt buyers over the past month is that inconsistency in the sellers’ response to current challenges is being translated into an inconsistent set of requirements being put upon upon buyers. This may well be driven by the current uncertainty around how current guidelines will form detailed regulations, but there is a concern that a continued divergence in requirements may place significant overhead on buyers looking to meet the needs of all of creditors. Any example of requirements converging - right down to the detailed level of what and how information is supplied - is welcomed by the market.

There is a consistent theme that on-going market stability remains the core focus for buyers and that they are willing to provide the information required to ensure that the market remains buoyant. There is, however, some concern around the level of visibility required by sellers and exactly how this data and information will be utilised, one buyer stating, “We will, of course, provide any data required to support audit activity but would be reluctant to share anything that gives away our IP or compromises our position”.

Our view is that greater transparency and visibility will provide wider benefits to buyers; this will not only ensure the continuation of current activity but will also re-open other opportunities such as the secondary sale market. With improved account monitoring and tracking there is no reason that this market cannot return, albeit within tighter guidelines linked directly to the levels of visibility of account treatment. We are also anticipating that new regulations will result in an extension of audit requirements from the current focus on policy and process towards account level monitoring; once again increased transparency will provide wider benefits of reducing the resource required to manage these new requests.

As with the creditor market, a number of buyers are starting to take a proactive approach and look for tools that can help them better engage with sellers post-sale. This approach enables the immediate demonstration of their ability to support creditors in meeting post-sale monitoring requirements whilst positioning the buyer as market leaders in interpreting and responding to regulation.

By Chris Smith, TDX North America

Creditors - consistent questions, inconsistent answers; the search to meet new requirements in debt sale

The US debt sale market has been through a turbulent period over the past 5 years, with the credit crunch impacting both the availability of funding and pricing across the market. This storm has been weathered and at first glance the market now appears buoyant, with a healthy volume of sale activity and pricing steadily improving by circa 4% in general and up to 12% across some debt types. Our discussions with over 20 issuers over the past few weeks, have however, highlighted the next storm on the horizon for the US debt
sale market; growing regulatory requirements.

The change in attitudes of sellers towards compliance of buyers post sale, originates from the clarification by regulators that the customer relationship is retained post the sale of an account. This has recently been reinforced by the Comptroller of the Currency's (OCC) best practice guidelines, (which are likely to be developed into formal regulation) which state that sellers are expected to have clearly document processes to audit and monitor their third party suppliers.

This is causing a challenge for sellers as introducing such mechanisms for auditing and monitoring a wide-scale purchaser panel is resource intensive and hence costly, with one global issuer quoting “the cost associated with auditing over 100 purchasers across the globe is huge and I am keen to explore any options that help me target my activity where truly required”. One response to this challenge, which has been seen in well publicised examples, is for sales to be delayed or even pulled from the market, but this cannot be the right answer.

A number of issuers are however, now taking a pro-active approach to responding to these growing regulatory requirements; namely by gaining greater visibility of their buyers activity. This is enabling an effective auditing and monitoring process as outlined by best practice but is resulting in sellers asking a new set of questions;

• What information should be gathered?
• How can this be obtained from buyers?
• What will be the integration costs of obtaining this?
• How can the data be utilised when it is gathered?
• What complexities does re-sale add into this challenge?

As with any market, this challenge is affecting all entities; i.e. both sellers and buyers. The solution also needs to be driven by all parties to ensure the on-going stability of the debt sale market. Our position as an industry intermediary affords us the ability to view and understand the opinions of both sides of the market. As such, we will report back shortly, to provide you with an update on how buyers are viewing the current challenges across the sector and their thoughts on the solution.

By Chris Smith, TDX North America

A fresh view: What do you really know about the debt industry?

Over the coming months, we'll be sharing a series of posts which offer 'a fresh view'. They are the thoughts and observations from colleagues who have recently joined TDX Group.

Liz Crosland-Taylor joined TDX Group in March 2013 and works in our Advisory team. Here she shares her thoughts about the debt industry, and how it's not quite as she thought it would be.

What do you really know about the debt industry?

I’m new to the debt industry, and when I took a job at TDX a few months ago some of my initial thoughts did include, what do I actually know about debt? I pretty much had my socialised and personal view of debt, at a micro level. In my eyes it was something that, at a very basic level, was to be avoided if at all possible. Debt = bad. OK, well it wasn’t quite that basic, but fairly close to that, and indeed what I think the media would have us believe.

Working in an organisation that sits in an advantageous position centrally in the debt industry - and I say advantageously because TDX is positioned to comprehend the perspectives of participants from all sides – has definitely expanded my understanding of all things debt-related.

My original understanding was rather myopic, but reinforced by countless news stories detailing the miseries experienced by debtors struggling to get out or stay out of debt. Yet, paradoxically, it seems that many are actually clamouring to become debtors – all those people struggling to get a mortgage for example. Clearly debt can be good in some instances – it can be an opportunity. This may be in the form of a student loan that enables further education, or a mortgage that gets you onto that first rung of the property ladder – which is probably one of the largest debts someone acquires over a lifetime.

I have also realised that debt can be essential. A normality. Using a credit card or payday loan to assist with the timings of getting paid and paying overdue bills, or even technically being ‘in debt’ to utilities providers as I pay off my debt to them (having already used the gas and electricity they provided).

When I first mentioned my new job at TDX to friends and family, they joked that I was about to become a debt collector and go around knocking on doors. Obviously this is not true, but it made me realise that people outside the debt industry have very little realistic knowledge of what actually goes on!

I couldn’t possibly list all the many things that have pleasantly surprised me as I’ve been working at TDX – but here are just a couple of examples:

I didn’t know the extent to which organisations in the industry are quickly trying to respond to our changing culture and society, for example, the development of online e-collections tools and platforms that are already widening the methods people can use to make repayments - especially at times and in ways that are more convenient to them.

I also wasn’t aware of the degree to which compliance (treating all customers fairly and in accordance to their circumstances) is seen as fundamental across the industry. Nowadays creditors and Debt Collection Agencies (DCAs) think hard about the ways they treat their customers so that they can ensure fairer treatment for all.

So, to sum up, just a few months of working at TDX has transformed my understanding of debt as an entity, and its varying meaning within a context. I continue to understand that the debt industry as a whole, which may seem superficially basic or simple on the surface, is, in reality, a highly complex and multidimensional industry. I must admit I am grateful for having my eyes opened to an interesting industry that is a hugely important part of many peoples’ lives.

Liz Crosland-Taylor, Consultant, TDX Group

US market trends – is the world spinning slower?

My daughter returned home from school this week to inform me that the moon is causing the earth to spin slower, although the lengthening of the day by 2 milliseconds every century does not feel like too much of a cause for concern!

This did cause me to draw a parallel to the Receivables Management sector which has been spinning faster and faster over the past 10 years driven by developments in technology and a focus on low cost fast spinning dialler sophistication, low cost focus on pure contact ratios, and low cost off shoring. Our world however, is now also being impacted by wider forces and starting to ’spin slower’ with the onslaught of regulations and sensitivity on how customers are treated.

While no creditor is completely immune to the implications of new regulations coming from the CFPB, FTC, or other regulatory bodies, perhaps for the first time the challenges faced within the US are being better handled by others who have not been so dialler reliant. Are there lessons to be learned globally from less dialler intensive environments?  Are there new technologies being deployed globally to sustain liquidation rates and enhance the customer experience? Will these new technologies result in far superior insights and better customer experiences?

Answers to these questions can be taken from markets and sectors which have remained customer-centric, rather than focussing on creating the most effective one-size-fits-all approach. These markets utilise niche strategies and suppliers to manage accounts at a granular segment level rather than at the wider portfolio level. They utilise technology to ensure disputes and complaints are responded to in a timely manner and they have controls in place to manage any exceptions to the process.  An additional benefit to this customer-centric approach is that it not only improves adherence to regulatory guidelines but also underlying portfolio performance.

In summary, creditors with a generic approach to collections will carry on being heavily influenced by external regulatory factors and will continue to be required to make difficult decisions which damage performance in favour of adhering to increased regulation. Those with a customer-centric approach, however, will continue to ’spin at a steady rate’ as a result of being well placed to deal with the external regulatory factors.

By John Telford, CEO - North America, TDX Group

TDX Launches in North America, Marvin Gay, Disney, and “Going to PLATO”

In the words of the famous singer Marvin Gay, I would like to address the question of “What’s going on!”

As many of you may know, following on from TDX Group’s successful launches in Spain and Australia, we have entered into the US market. Our head office has been established in 'Old Town' Alexandria just outside of Washington DC, and we are well on our way to building a great business. As we move forward, I want to thank you all (our existing clients, staff in Nottingham, and many global partners) for the enthusiasm and help in our set up.

As anybody who has been to Disney knows, 'It’s a small world', indeed when we look at collections globally, the challenges facing creditors are remarkably similar. Let me share with you a little of what those look like here in the USA:

• Our primary regulatory body the CFPB (Consumer Financial Protection Bureau) has aggressively started putting creditors and collectors on notice on a wide range of issues regarding the treatment of consumers.
• Fines and penalties have started to be levied in the range of millions of dollars.
• Creditors lack the tools to effectively operate in this environment, specifically to manage and be compliant in their outsourced Debt Collection Agency (DCA) activity.
• Challenges include: lack of visibility into activity, lack of ability to effectively place and recall account, ineffective management of queries, lack of the ability to truly test and learn strategies, lack of the ability to effectively place compliantly and confidently with a wide Agency panel.
• Our view and analysis shows that creditors are making irrational choices because of lack of appropriate systems, including consolidating the number of Agencies on their panels leaving them in a downward spiral that will negatively impact returns by 10-30%.
• IT resources are constrained and the majority of tools require long integration time frames.
• Agencies are consolidating and many are ill equipped to take advantage or 'win' in this environment.  They have spent the last several years on low cost off shoring and dialler technologies instead of smart data and analytic strategies.

That all leaves us in a very familiar place . . . going to PLATO!  We believe strongly that we have a good story to tell.  PLATO (our SaaS based debt placement and management solution) has been developed with the goal of driving performance at the granular account level, exposing data so that all consumers get treated fairly through the complex strategies creditors need to deploy. We built it because we knew that visibility and data drives performance. As it turns out, that same visibility and data now helps assure compliance and organizational efficiency.

Over the course of the next couple months I will try to dive deeper into these issues, but for now thanks again for the warm welcome back.  John

By John Telford, CEO - North America, TDX Group

Global trends - it’s a small world, even in collections and recoveries

The US remains the world’s most developed Recoveries marketplace but, perhaps for the first time, the challenges faced within the US are also being faced by issuers around the globe creating an opportunity to take a global view of potential solutions.

A recently published IMF report reminded us of the increasing inter-dependence of global economies, with the most obvious example of this being the recent economic crisis which spread instantly around the globe. This global crisis of 2008 is also the key driver of the alignment of market trends within the worldwide Receivables Management markets, as the resultant increased focus on the banking sector can be directly linked to the shift in priorities towards compliance and regulatory adherence.

One commonality across a number of markets has been the introduction of new regulatory bodies including the CFPB in the US and the FCA in the UK who are at the forefront of driving the customer agenda in their respective geographies. A number of recently introduced regulations are comparable, e.g. the US Validation Notice and UK Notice of Assignment, both of which outline a debtor's rights with respect to third party collections activity. However, there still remains a significant difference surrounding how these are applied, with creditors in the UK continuing to be self-policed to a greater extent than those in the US.

The initial reaction to the regulatory challenge has also been similar across the globe with some swift decisions being made without consideration being given to the impact on the underlying collection rates. These include the immediate barring of secondary sales by a number of creditors (although this is a significantly smaller factor outside the US) and the consolidation of third party collections suppliers in an attempt to ease the compliance burden. There is a need, however, to effectively balance compliance and performance, and those issuers who are starting to see third party suppliers as an extension of their internal collections teams are finding that the increased visibility and control of supplier activity which is required by regulators is exactly what is also needed to drive performance.

The key output of the IMF report was a requirement for closer collaboration between countries with regards to economic policy. The ‘globalization’ of Receivables Management means that we should look to do the same; learn from each other to gather global insight into solutions to the common challenges. Our view from across the globe is that those issuers with sound fundamentals – data, process and technology – are those that are able to remain pro-active and drive both performance and compliance improvements out of regulatory changes. Without these basics in place, creditors continue to react to requirements and are forced into sub-optimal decision making which is likely to result in compromised performance levels.



By Stuart Bungay, Director of International Expansion and RM, TDX Group

Council tax collection rates headed for a fall – in terms of results and reputation?

Listening to the radio on the way into work this morning, I heard a news story about ‘Bailiff’s chasing working parents for debt’. The CAB, whose research created the story, doesn’t mince their words when it comes to the use of bailiffs. Gillian Guy, Citizens Advice Chief Executive commented:

“We’re concerned that all too often debts, like unpaid council tax, are passed to bailiffs too quickly without recognizing that the person may be struggling and need help like repayment plans.”

Their press release goes on to state:

“Evidence from CABs has found private bailiffs frequently overstate their powers, act aggressively and bump up debts by levying excessive and illegal fees and charges.”

This got me thinking about the challenges the public sector face when it comes to collecting debt.

In recent years, and in the wake of elevated scrutiny, an ever increasing focus on adherence to regulatory standards and ensuring that we all treat customers fairly (TCF) has meant a revolution in the way that financial services companies have recovered debt.

In contrast, amid a climate of austerity and biting budget cuts, Local Authorities seem to have evolved very differently. The release of last year’s English councils’ collection rates for council tax and national non domestic rates (business rates) was met with much fanfare, however, the marginal improvement overall (0.1% percentage points on 2011/12) seems somewhat underwhelming when compared with the pace of change experienced in the private sector since 2008. What’s more, there is an argument that council tax collection rates are actually likely to fall in the present year because of the impact of welfare reform and the localisation of the council tax support scheme, meaning many people will be getting a bill for the first time. If this proves to be the case, clearly headlines will be very different. Interestingly, reading the facts and figures supplied by CAB on their website, 87% more people sought online advice about council tax this April compared to the same month in 2012 – and that’s before the real  extent of the changes start to kick-in.

So why do most councils have such a reticence to change? Having met with a good number of local authorities around the country I certainly don’t take the view that lack of change is due to any perceived public sector passivity - quite the contrary, in fact. The main problem here is a system that makes the ‘recovery method of last resort’ – bailiffs – the cheapest option. When compared with other methods of collection the cost of bailiffs is extremely high, however, these fees are born by the debtor so, from the councils’ point of view, the service is free. As a result, the innovative services and technologies widely used across the private sector have not been widely adopted because, whilst their overall cost is lower, they represent an incremental cost to the authority.

I appreciate the obligations of public sector bodies when spending tax-payers money, however, allocating all defaulted accounts to a bailiff relatively early in the process may be a short sighted view. Field enforcement has its place; however, a diverse recovery strategy can have significant benefits in terms of increased revenues and time to recovery. What’s more, engaging with citizens in a way that it is tailored to their situation is not only morally right, it creates an environment where the problem is less likely to recur the following year.

Local government is undergoing significant change and revenues departments are not exempt. The impact on recovery of the imminent setting of bailiff fees into statute under the Tribunals, Courts and Enforcement Act is as yet unknown. Whilst it is a long overdue shake-up of the enforcement industry, those councils with diversity of strategy will be best placed to manage the regulatory change. I do think, however, that these changes will offer a wider opportunity for local authorities to take a look at their collections and recovery strategy as a whole. By way of example, Most are already performance managing bailiffs to some extent; however some of the tools used in the private sector could greatly improve this process. In addition authorities should also consider initiatives such as e-collections, data sharing with the private sector and utilising the huge experience available through the specialist debt collection industry (DCAs). With the new charging structure coming into force in April a single bailiff visit is likely to cost the debtor £400 (assuming an inflationary rise and the addition of VAT) this will be politically very challenging for many debt types and the availability of alternatives will be crucial.

As has so often been the case in the past, challenges around procurement and contracting should not be used as a barrier to progression. In a climate of increased financial hardship, only by having a well-designed strategy, properly segmenting debt and having multiple channels for recovery can authorities increase collection rates, reduce operational cost and improve the citizen experience.

Paul Fielder, Strategic Account Director, TDX Group

All caterpillars are butterflies on the inside: an intern's view of working at TDX Group

Spot the odd one out – 1) Bungee jumping. 2) Quad biking. 3) Working in the debt industry. 4) Swimming with sharks. I bet you chose number three, didn’t you? Presumably because it appears to be dead boring… right?

I currently find myself halfway through a two month internship with TDX Group, and I have to say, it really is quite the opposite of boring. Being a student of Ancient History, the debt industry is a brand new field to me, and I will admit that I did have my worries about how I would take to it, or to be brutally honest – would I actually like it!

It turns out that my fears were completely unwarranted. Instead of counting down the clock each day, I’ve found myself thrown deep into a world filled with exciting and unpredictable variables, challenging regulations that demand constant attention, and best of all, countless opportunities to stretch myself and produce work that I know has a significant end result.

From day one I’ve been given stimulating work to do, work that I get excited about seeing through to the end. I actually find myself feeling sad that some of the projects that I have been working on won’t be completed until after my internship finishes! Now admittedly, the debt industry may not be to everybody’s taste, but for me at least, it certainly falls into life’s ‘don’t knock it until you’ve tried it’ category.

What has really made my time here so enjoyable though, are the company and the people that form it. Everybody I’ve met has been extremely passionate about their work, and has been kind enough to take time out of their busy schedules to bring me up to speed on their role within the company. Whilst there’s a lot to take in, everyone loves being asked questions about their particular specialism, and nobody lets ego or stature get the better of them. There is also a great sense of being a team within the office, with even the most senior of management sitting in the large, open plan desk area. Even during my short time here I have noticed the positive effects this has; it’s little things like that which help to really make TDX stand out from the crowd.

I know full well that I’m extremely privileged to have had the opportunity to be spending my summer at such an exciting and interesting company, and have learnt a lot during my time here; insights and knowledge that I know will stand me in good stead wherever life may take me.

If this is how I feel only coming up to the halfway mark of my time with TDX, then I’d say things are looking very good for the remainder of my internship! If you’re reading this as a student, then I urge you to consider doing a summer internship, the skills and experience you pick up are invaluable in the job market place. If you’re reading this as someone specifically researching TDX as a workplace, then I can assure you that it truly is an excellent place to work.

Until next time,

James Bradshaw, intern at TDX Group

N.B. I’ll be writing a ‘conclusion’ to this post as I finish my internship, so make sure to check back towards the end of August for that.

The Cost of Compliance

At a recent meeting I was asked if I knew of any work available on the cost of compliance to our industry. On the train home I had plenty of time to reflect on the question and how our industry operates.

In the ‘good old days’ collections was all about getting the money quickly. Pushing for payment in full first, if this was not possible then it would be two instalments and slowly extending repayment periods. Key collections metrics for agents were average payments and promises kept among the normal operational metrics. More often than not a debtor has more than one debt, and it was a competition to get to their disposable income first so yours got paid first.

The push for higher payments and short repayment periods meant that many promises were broken along the way, as they were never really affordable in the first place. Even if a customer  could afford the current creditors payment scheme, as soon as the next creditor got in touch and convinced them to pay them then, once again, the previous creditor’s scheme became unaffordable and the arrangement would be broken.

If you were consistently the first creditor in conversation with the debtor and always managed to get payment in full then you would not want this system to change. For all the others, broken promises teams would have to re-engage the customer and start the cycle again, and operational expense was certainly not optimised.

The principle of the current compliance regime is affordability, we can all argue what should be reasonable expenses to include in calculating this – I often do - but we cannot argue with what is trying to be achieved. Ensuring the debtor can pay off their debts as quickly as possible in a sustainable way is in everyone’s interest.

There will always continue to be debate on how we do this:
• Do we need to do an income and expenditure (I&E) to assess affordability for every customer each time we agree a payment in collections?
• Should we do a full I&E each time we make a loan? I have recently taken out a mortgage and have been asked fewer questions about my income and expenditure than I would get if I wanted to pay a debt off in a collection agency.

Ultimately,  the principles of compliance are not the ones costing the industry, it is the interpretation and application of these principles which are. It is this balance which we should continue to focus on to get right. If we could do this, the question I would have been asked is ‘what is the cost of not being compliant’?

By Nick Georgiades, Director - Advisory Services, TDXGroup

4 tips to ensure compliance and performance – a lesson from the gentleman’s game

In 2003, England won the Rugby World Cup; the first time a northern hemisphere country had ever won. The team that took the trophy home was clinical, disciplined and professional. Getting to that point did not come by mere chance; it was the culmination of several years’ worth of dedication from a group of coaches, players and mentors putting in place the right fundamentals to ensure ultimate success.

Coach Clive Woodward had strict rules for his players. He insisted that all players were ready for pre-arranged meetings 10 minutes early, that they dressed smartly at all times, that their language was clean in public areas, that mobile phones were only allowed in players' rooms….. and the list went on. Woodward argued such "critical non-essentials" make a huge difference in business, sport and, indeed, life.
So, how does this relate to debt?

In April 2013 the Financial Conduct Authority (FCA) came into being, with new powers to ensure that financial services companies demonstrate and measure the fair treatment of customers, and prove how this results in fair outcomes for each individual customer. In order to meet the standards expected by the FCA, taking a leaf out of Sir Woodward’s book would certainly do no harm.

1. Fix your platform
There was no doubt in anyone’s minds that if a game of rugby came down to the last 10 minutes, Woodward’s team would be the fitter, more physically adept team, and would close the game out.  It was this confidence in their foundation - the platform if you will - which ensured that when it came down to crunch time his players would win the battle in every situation. This is true in most situations, including debt - if you only have tools that allow you realise 60% of the benefits, you need to look for ways to quickly access that extra 40%.

2. Know more
Woodward had teams of analysts studying teams, players and tactics, which, in the end, revolutionised the way in which international teams approached test match rugby. Taking a leaf from his book, if you continually try to understand more about your customers in arrears and learn how to use that knowledge to ensure fair treatment, improved performance will naturally follow. For example, do you currently know which of your customers is already paying one of your existing DCAs? What additional data could you gather to help make contact? What is the level of activity your agencies are undertaking? Too little activity and you run the risk of poor performance, yet too much just simply isn’t fair to the customer. There’s a fine balance between efficiency and harassment and you need the tools to undertake this balancing act.

3. Use the power of prediction
Studying team decision making when in play can help you here - how does England counteract and premeditate opponent moves on the field? By always being one step ahead and using intelligence instead of pure brute strength.  So, what are your tactics with debt? Do you understand how your customers will respond to different forms of contact? Knowing how customers react in situations and being able to premeditate is a powerful weapon in your arsenal.

4. Focus on the prize
Woodward had a goal in mind; everything he and his team did was with the single aspiration of being the best team in the world in 2003. Similarly, within our industry we have an impending deadline of 2016 – the date the FCA regulations come into play. The opportunity exists now to ensure you are best prepared for this day.

In summary, every team and every business has great aspects, but it’s the ability to identify the areas where improvement can be achieved, and the prospect of excelling in every department that sets the world-class apart from the ordinary. Just ask Woodward!

By James Breadon, Business Development Manager, TDX Group

6 tips for incentivising the right behaviour

My 13 year old son plays centre forward for a struggling local football team.  They’ve recently finished a tough season during which goals – never mind victories – were a rarity and they finished bottom of their league.

Mid-way through the season my son asked me for a new phone. Because I’m not as skilled as his mother at saying “No,” following several weeks of nagging I made one of those spur of the moment, ill-conceived parental promises. “If you score a hat-trick between now and the end of the season you can have one.”

Given the season they’d been having I thought I was on pretty safe ground.  Besides, what was the worst that could happen – my son would try that little bit harder and help his team scrape a much needed win?

So – did Dad’s little incentive scheme have the desired effect or were there unintended consequences?  In summary, no and yes! Some of the most noticeable changes in behaviour were:

• My son was never the most generous team player, but now he stopped passing altogether in favour of speculative goal attempts from all pitch positions (running back to help the rest of the team was another casualty of his new found focus).

• His team mates started to get a bit resentful and some of them stopped passing to him.

• The resentment even spread to some of the other boy’s parents who were getting grief from their kids about my son’s potential bonus and the lack of theirs.

So what’s all this got to do with effective collections?

Well, in the Advisory team we spend a lot of our time reviewing the effectiveness of creditor’s collections and recoveries operations.  In the same way as my well-meaning incentive scheme didn’t necessarily drive the right behaviour in my son (or help his team), we see numerous examples of incentive schemes and structures within collections operations having unintended consequences.  For example:

One creditor we worked with boasted about their high collection agent retention rate and ease at which they recruited new agents from a competitor down the road. This was linked to the fact that their agent remuneration package was heavily weighted towards a relatively high basic but with limited scope to earn commission for over performance. It transpired that all the best collectors were working for the competitor who offered a lower basic salary but where the OTE was much higher.

In another creditor we saw the best performing agents were those who were automatically writing-off a debtor’s fee and interest on every call (doing this counted towards the agent’s revenue target.  It was meant to be only permitted as a last resort but the absence of appropriate checks and MI meant that the best performing agents were exploiting this loop hole).

Another organisation we worked with offered no commission scheme at all to collection agents on the basis that, “The Union doesn’t like the idea of some agents earning more than others at a certain level.” The resultant collection rates were poor.

On another, call handle time was a key measure without appropriate control, we found that some agents were hanging up on calls at the end of the day to hit their target.

What are our 6 tips for an effective collections incentive scheme?

1. Ensure incentive schemes are aligned to company objectives
In our experience, measuring agents across a series of broad categories of behaviour which drive a balanced incentive scorecard works well and ensures alignment with broader company objectives and the right agent behaviours.  The combination of behaviours we see agents measured on most commonly are effectiveness (e.g. amount collected), efficiency (e.g. volume of work carried out/productivity) and quality (e.g. adherence to process/compliance).

2. Build flexibility in to the scheme
As the business priorities change (or agents get wise to the limitations of the existing schemes!) incentive schemes need to be sufficiently flexible to encourage a modification in agent behaviour where required.  For example, in a certain month the business focus might shift to be more on cash collections at the expense of average handling time and the way agents are incentivised should be modified to reflect this (the balance scorecard helps with this).

3. Ensure schemes are realistic
We’ve seen examples of incentive schemes with ‘entry criteria’ which are either very broad (i.e. more or less everyone qualifies) or overly stringent (very few agents qualify).  Both can be a disincentive.  The trick is calibrating any qualifying criteria over a few months to ensure the schemes are balanced and realistic.

4. Ensure scheme provides a genuine incentive
Top collectors are ambitious and enjoy success.  In our experience good schemes will enable top collectors to earn twice what a poor one earns (but they will collect 3 to 5 times as much).

5. Ensure that the right MI is available
Good management information ensures that performance can be monitored and managed at all levels of the organisation and that agents have full visibility of their performance on a regular basis.

6. Manage poor performers
Consistent poor performance needs addressing through training, coaching or moving them to a more suitable role. Often, those who work in customer services aspire to the incentives and rewards of collectors but find it difficult to make the transition in behaviour required.

And, as a foot-note to this story, you may be interested to hear that my son didn’t get a hat-trick.  He did, however, get a new phone, but only after having helped with some jobs around the house and so, don’t worry, my parental integrity remains (more or less!) intact.

By Charlie Horner, Lead Consultant, TDX Group

Keeping up with the competition

Recently I was asked "if I am doing everything that I can think of and still not beating the competition what should I do?" This person had made a lot of improvements to their company and had, for a short period, been doing well. But the competition had reacted and they were once again falling behind. My, rather abrupt, answer was "think harder or give up" which entered us into a broader discussion.

Unfortunately, after having made a series of process improvements, this person was now back to doing business as usual - and this was the problem. Henry Ford once said, “If you always do what you’ve always done, you’ll always get what you’ve always got.” Nowadays the pace of change is so rapid that there are few instances where this remains the case - those who don’t continually innovate and streamline end up falling behind and struggling to survive.

A good example of this is AA Insurance; a decade ago it had a large network of retail premises, offered good quality competitive insurance and continued for a number of years building on this model. However, when Direct Line saw an opportunity to change the way insurance was bought, reduced overheads and therefore premiums, it took great market share and AA Insurance started to struggle.

AA insurance is still here today thanks, in my opinion, to the great visionary work of Mark Wood who came in and made a number of hard, radical decisions which looked to the future instead of reflecting on the past. He was not popular with everyone, good leaders rarely are, but he did turn the insurance arm of AA around.

Going back to the original question I was asked - the person I was helping was well intentioned, very good at delivering change, but was lacking the understanding of what was possible and the ideas to get there. Their real question was how do I go about identifying opportunities for improvement? This is far easier to address. To do this you should look at your own operation with a critical eye and assess if it is it better than last month?

Questions you should be asking are:

• Am I really making best use of all the resources I have available to me?
• What are my current constraints and can they be eliminated?
• If I were to start from scratch what would I do differently?

A regular review of what is happening externally in your market is also key:

• How is my performance compared to the market? The earlier you can identify any gaps and trends the better you can assess and react to them.
• What are my competitors doing? What are they investing in, what capabilities are they building? If they are investing they are expecting a return and you are likely to see your comparative performance change in the future if you do not invest too.

Continual improvement is now a part of all business. Building this into the company culture and making time to capture and assess a broad array of information and data at regular intervals is now what distinguishes the great performers. The best performers tend to use the broadest range of data available from a multitude of sources including:

• Good quality internal MI
• Regulator reported information
• Publicly available data sources
• Industry and sector  shows and conferences
• Industry press
• Benchmarking studies
• Networking with peers

Investing time and resources to gather and review this information to drive change in your business is key.




By Nick Georgiades, Director - Advisory Services, TDX Group.