Thursday, 29 August 2013

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

Tuesday, 20 August 2013

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

Tuesday, 13 August 2013

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