Like most of the industry, TDX has recently been reviewing the CFPB’s Advanced Notice of Proposed Rulemaking (ANPR) and collating our thoughts to help the industry provide a rounded response to the questions laid out by the regulator. Going through this process provided us with a great platform to consolidate our thoughts on a number of the key issues currently faced by the debt industry.
One of the interesting questions repeatedly raised throughout the ANPR is the impact that regulatory changes will have on the industry, both in terms of cost and collections’ performance. In other markets increased regulation can have a detrimental impact on underlying performance; our view is that this is not the case across the debt industry as customer experience is inextricably linked to collections’ performance. By targeting industry inefficiencies the CFPB is not only driving creditors to improve their customer experience but is also helping them to enhance their collections’ strategies and, as such, improve collections.
A number of the challenges faced by the debt industry with regards to the management of third party suppliers, such as collection agencies and debt buyers, can be linked back to two underlying root causes; inefficient systems and lack of overall visibility.
The first fundamental challenge when managing third party vendors is a lack of account level visibility while accounts are being managed externally. There may be little value in clarifying precisely what activity is allowed (by either creditors or regulators) if exceptions to these regulations are not immediately and robustly identified, managed and mitigated. Once this level of visibility is achieved, through either systematic or sampled audit activity, then the guidelines currently in place, around areas such as excessive calling, should not require further definition, as creditors can develop and manage against their own internal policies.
Secondly, challenges relating to information transfer of data, media and information are often rooted in systems utilized to manage third party interactions which are not designed to manage this process. This places constraints or delays on the transfer of information, furthermore, the manual workarounds often put in place often increase the likelihood of errors; both of which can impact the resultant customer experience.
It is clear that 2013 saw the debt industry passing an inflexion point with regards to its priorities; a shift away from performance and firmly towards adherence to regulatory requirements, there is, however, further room for the market to progress. Based upon our experiences across the globe, we see that markets which focus upon the principles of the fair treatment of consumers, and not just on meeting regulatory requirements, are those which drive optimal behaviors. The challenge currently faced by the US debt market is how to move away from merely satisfying the changing regulations, towards driving best practices which ensure the optimal treatment of customers, which will, in turn, drive improved performance.
By John Telford, CEO North America, TDX Group