One of the items of debt collection data that needs to be reported to the FCA on GABRIEL is ‘stage of debt placement’ – in other words, how many times a debt has been placed for collection with debt collection agencies (it’s commonly known as recycling). Once a creditor has exhausted in-house attempts to recover money owed on an account, they will often place it with debt collection agencies. Typically a three-placement strategy is deployed meaning if the first agency is unsuccessful at gaining payment, the account will pass to a further two agencies, usually at ~90 or ~180 day intervals.
In capturing this data, the FCA is seeking to understand the risk associated with debt placement, which we wholeheartedly support. However, the reporting of this data is far from straightforward because the way data flows between creditor and agencies is not as complete as it should be (and this goes for the whole customer lifecycle – not just between in-house collections and out-source recoveries – but that’s a topic for another blog!).
Organisations, such as ours, have been seeking ways to capture all customer journey information in one place. At TDX Group, we’re in a good position to achieve this because of our long-term relationship with our panel of agencies and our creditor clients – but what about the rest of the industry? Achieving consistency of data capture and reporting across the board feels like a mountain to climb and it’s one our industry body, the CSA, is working hard at.
So, in the meantime, how about we all choose to think and act differently? Ultimately, a placement represents contact with someone who is in debt, but it’s not the full picture as each agency will make a number of contact attempts within a placement. Knowing your customers’ circumstances and their behaviour opens a world of opportunities to resolve the situation as quickly (efficiently) and fairly as possible.
For example, if you knew someone was very unlikely to pay you (perhaps because they lacked the means), then it benefits all to contact them just the once to verify their situation. This way, you don’t increase their anxiety by repeatedly asking them to make a payment they simply cannot make, and you save the cost of spending £3-£4 on a series of fruitless letters, calls, texts etc.
If you additionally knew that the reason for non-payment was temporary (for example, some sort of financial shock such as losing a job), but they were likely to recover in a few months, then you will create a better customer experience and get better results by holding that account with the agency who made the initial, successful contact – and returning to them in six months’ time to check-in on their circumstances.
The same approach can be applied upstream from recoveries as well. At TDX Group, if we have a client who places accounts to us for recovery and they liquidate quickly and easily, we know they should never have been passed to us in the first place, so we work with our client to identify what the problem was in their in-house collections process.
Now, don’t get me wrong; at TDX Group we’re obsessed with data – and we’re determined to make a difference by ensuring all the data we can capture, is captured in one place – but our drive behind doing this is that we want to know what to do before we take any action. We don’t want to put any account through unnecessary contact attempts, or placements if we shouldn’t or don’t have to. The only reason for placing an account with a different agency should be a discovery about the individual’s circumstances which means it is both valid and reasonable to ask another agency – perhaps a specialist – to try to contact them. Another example would be engaging a specialist trace agency if contact details are not accurate or known.
So, let’s talk more about how and why we’re making contact and what we learn as a result. This is what will drive the biggest shift in fair outcomes and improved performance.
By Richard Anderson, Head of Advisory, TDX Group