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