The combination of US GAAP provisioning rules and the ability to transfer risk (financial and reputational) to a third party has fuelled the US market over the last two decades. However, in recent times the mood in the US debt sale market has changed significantly. The newly formed and highly influential financial regulator, the CFPB, has the debt sale market firmly in its sights and is intent on ensuring that creditors do not transfer their obligations to individuals to a third party through debt sale. As creditors are forced to review their approach, supply is being restricted. In addition, many of the larger purchasers have seen their funding costs decrease dramatically over the last 18 months enabling them to actively bid-up the price of assets. In short, a bubble is being created in the US market.
For US debt buyers these are troubling times. Many of them are now looking for alternatives to hedge their US position and it appears the most likely outcome is that those who are not already active in different geographic markets will look to diversify over the next 12 months. The obvious first step is the UK market. Whilst debt sale is competitive in this market, the US players have a crucial advantage; their scale dwarfs the current UK incumbents and as a result they have unrestricted access to significant funding at extremely low cost. One significant US buyer recently commented, “… buyers are increasingly looking towards European markets, especially the UK, to protect existing revenue streams and potentially drive future growth.”
For years many of the debt sale techniques and processes we now take for granted in the UK were originally conceived and rolled out in the US. It now looks as if we’re about to gain a little more from across the Atlantic – in the shape of many more players.
By Stuart Bungay, Managing Director - Strategy, Marketing and International, TDX Group.
Friday, 25 January 2013
Monday, 21 January 2013
More and more often when I talk to our clients, the need to comply with the latest regulatory changes is a strong focus for their businesses. Getting the balance right between treating customers individually and fairly whilst recovering valid debts is a fine line to get right and they are increasingly turning to technology to deliver compliant processes. Their main reasons for this being:
1. Knowing the exact status of every debtor’s accountRecycling debts through multiple placements is common place in our industry, however it is fraught with opportunity to create complaints. Technology can provide solutions to avoid these through systematic controls such as full portfolio reconciliation and linking related processes, for example, to prevent queried or disputed debts from being recycled.
Being able to show that customer queries and complaints are handled effectively is a key component of the Treating Customers Fairly (TCF) outcome principles. When utilising external agencies or selling debt to debt purchasers this becomes increasingly complex. And when done at scale only a systematic solution, such as a real-time query workflow management tool, is able to support the necessary process to effectively manage the interactions between customer, agency and creditor, and, importantly, provide the management reporting to evidence that turnaround times are acceptable.
The recent Lending Code edition means creditors and debt purchasers are expected to share more detailed customer data with each other and external agencies. This includes quantitative data such as account statuses, and qualitative data, such as income and expenditure records, payment arrangement information or a customer’s agreed contact method. This complex challenge is being solved in different ways through technology, typically via richer XML data exchange or through data portals which provide better visualisation and hence better interpretation of the customer’s data and circumstances by collectors.
Customers have increasing awareness of creditors’ obligations, the regulatory environment and their ability to influence brand reputation. This inevitably leads to creditors needing to tailor their approach around the individual. I envisage this focus on being customer centric will drive our industry over the coming years. The emergence of new data services such as TDX Group’s data exchange HeliX, alongside platforms which use this data to enable granular segmentation and tailored treatment paths to show a full picture of the debtor, will become the de facto standard.
By Matt Trueman, Head of Platforms and Technology, TDX Group.