Personal Insolvencies: 2015 represented a turning point … it’s time for another

The last two years has been a period of significant growth and change in the Individual Voluntary Arrangement and Trust Deed market. Looking back through the last decade at the drivers behind volume changes, you can’t help but see the pattern which makes it clear that now is the time for more regulatory change.

In the lead up to 2006 the UK experienced an explosion in personal insolvency volumes driven by changes in legislation and the resulting emergence of ‘factory’ type firms commoditising personal insolvencies through mass marketing and production line operational processes. Post credit crunch, volumes fell, mirroring the contraction in unsecured lending/borrowing. The intervention of the FCA in regulating debt management firms from April 2014 saw a further fall in new IVAs and in Scotland TDs. However, since that time, a gradual increase in consumer credit has created a gap in the market which, since the second half of 2015, has been filled by mono-line personal insolvency providers who, unencumbered by FCA regulation, have grown rapidly. Additionally, now that the larger debt management providers have received full FCA authorisation they can once again invest in consumer marketing.

As a result, volumes set to return to, or even exceed, levels seen prior to the credit crunch and it’s time for a step change so that consumer outcomes are protected, creditors have faith in personal insolvency debt solutions.

Over the last 12 months, we have worked with industry regulators to support them in identifying and eliminating the irregular practices we have seen building up in the industry since the second half of 2015. However, there is more to do particularly around transparency in the regulation of the market, and a cross-sector approach is critical if we are to work together to raise overall regulatory standards.
We are asking the Insolvency Service to engage with Regulators (RPBs Recognised Professional Bodies) to deliver both short and long-term change, including the implementation of a single regulator for the personal insolvency sector and the regulation of all firms (not just individual IP level).

It’s important that consumers can access high quality debt solutions including personal insolvency because personal insolvency has the potential to deliver poor consumer and creditor outcomes. However, now is the time for the industry to work together to ensure personal insolvency regulation is enhanced to meet the needs of a changing industry and to bring it in line with the FCA’s regulatory principles.

By Richard Haymes, Head of Financial Difficulties, TDX Group

This is an extract from an article included in our regular round up of news and views from the debt industry, The Debt Review. Sign up to receive a copy here: Subscribe to The Debt Review

Work in progress: how we learn

As we launch Learning week 2017 at TDX Group, I have been reflecting on what learning means to me and to TDX Group as an organisation.

 

In my job I am often asked, ‘What training can I have?’, ‘How do I know what I need?’, ‘What will TDX Group do for me?’ and ‘How much money can I spend?’.

 

I used to measure and report on how many training courses we ran and how many ‘people hours’ of training we did and that somehow would make me feel good about the amount of ‘stuff’ we were doing – our colleagues *must* be learning all of the time, right? And yes I’m sure many of them were and have been then able to use what they have learnt to progress their careers. But, if we’re honest, there are times when we have all gone along for a course, enjoyed the lunch and come back to work. Guess what? Nothing changed… but the chips were nice... and the satisfaction scores were 4.3 out of 5.

 

I have spent a lot of time thinking about how to engage people, draw them in and then send them back into the world with an appetite for change and a curiosity and thirst for knowledge and I wonder if the day of the typical training course is disappearing and we need to do things differently.

 

In other parts of our lives (and even in the way our children learn at school) we use devices to watch TED talks, or listen to podcasts, or consult the University of Google (J), taking in knowledge in short, bitesize sessions. We want information quickly and we talk to our friends and colleagues and share information. This feels like a much more natural and self-driven method of learning. And, actively making the choice about what, when and why is critical. What I have definitely learnt is that individuals really need to have the desire to learn and to drive their own development – not to ask others to do it for them. This takes time, commitment and an awful lot of self-reflection and persistence. What I’ve also learnt is that when people are prepared to share their knowledge and expertise rather than hold it as power, then others can fly. Seeing someone who shares and applies their knowledge and experience in the workplace provides the role-modelling that is needed to turn information into learning and learning into change – for an individual, and for an organisation. 

 

This is what is so amazing about TDX Group for me and this shines brightly with Learning week. So many of our colleagues have offered their time and expertise to volunteer to run sessions on a broad variety of subjects from taxation (yes… really) to Spanish and mindfulness, personal brand and project management. 

 

We have an amazing resource bank of knowledge and a team of people keen to share it.

 

So go on ... offer up your time, share your knowledge, make a difference.

 

By Jo Thorburn, HR Business Partner, TDX Group

The business cycle is very much alive

Just before the crash in 2007, we had never had it so good. The housing and stock markets were racing ahead, banks and financial institutions were falling over themselves to lend further and further into the subprime market and then the music stopped. Almost overnight the credit markets seized up and the rest is history.
Around ten years before this, the Asian financial crisis swept through East Asia decimating the emerging ’Tiger’ economies and impacting severely the developed economies in Europe and North America.

The late 80s and early 90s were characterised by a recession which was in itself preceded by the stagflation which dominated much of the 1970s.

Looking at this objectively (and despite many claims that the business cycle is dead) it is evident that we are in a cycle of boom and bust that resets itself, to varying degrees, around every ten years. So, is now the time to start preparing for the next downturn?

As we look at the economy in 2017, stock markets are back at record highs, housing markets are rallying, lending continues to rise and many of the underlying structural issues that caused the 2007 crash remain unchanged. On the public sector side, government debts are spiralling and student loans have reached record levels. To be blunt, the warning signs are everywhere and once again we find ourselves in a credit fuelled bubble that will, like all bubbles, inevitably pop. Looking back to 2007, one of the key features of the economic crisis was how quickly it unfolded; the time from the first signs of crisis to individuals queuing outside banks was remarkably short. The key lesson, therefore, is that individuals and organisations need to act before any crisis hits if they are to protect themselves from the full impact of the downturn.

Here at TDX Group, like everyone else we experienced the rollercoaster ride from the global financial crisis as it impacted and ultimately reshaped our business. Thinking back, however, the activities of one of our clients in the year leading up to the crisis seemed insightful – and perhaps gives us all a lesson or two we can learn in the current situation.

Accepting that the economy was overheated our client embarked on a strategy to prepare themselves for what they thought was inevitable. Their strategy encompassed two key elements:

1: Fix the collections and recoveries process

To ensure the process in collections and recoveries was truly fit for purpose and scalable, they invested, up-front, in this capability to ensure that when volumes did start to increase they were ready to respond. Working with TDX Group provided flexibility and optionality across collections and recoveries and ensured that there was a plan B as suppliers exited the market and volumes spiked. In comparison, too many other creditors relied on debt sale, specific purchasers or specific DCAs and were severely impacted when they were no longer able to operate post the financial crash.

2: Clear out all warehouse and legacy debt

This client also embarked on an ambitious programme with us to divest all outstanding warehouse debt that resulted in the sale of around £1-2 billion of assets. The programme was so successful that as the crisis hit at the end of 2007, non-performing loans on the balance sheet were at an all-time low almost to the extent that there were no post default accounts.

What was generally lacking in 2007 were strategies aligned to individuals’ financial circumstances.  The strict one-size-fits-all approach implemented by many creditors simply resulted in consumers ignoring their problems, triggering a further rise in defaults and personal insolvencies, and a reliance on high-cost short-term lending. 

Being able to effectively identify and verify those who are capable of paying versus those who are potentially vulnerable and / or falling into genuine financial difficulty produces a wide-range of scenarios, each one requiring a carefully considered strategy. By responding to customers fairly and appropriately, active engagement with the customer is likely to be retained and recoveries activity can be targeted accordingly. 

Hindsight truly is a wonderful thing, but I think there is logic in really looking at the economic evidence around you and, using history as a guide, being prepared for what lies ahead. I think all lenders in the markets should be thinking now about the business cycle and how they can prepare for what lies ahead, this is not a question of ‘if’, it is a question of ‘when’.

Here at TDX Group, across our range of international markets, clients are starting to approach us worried about the next downturn and asking for help to ensure they are as well equipped to manage the consequences. As we move forward with these clients, the experiences of 2007 seem to resonate and as I look at the economic picture around us, being prepared now seems more important than ever.

By Stuart Bungay, Director of Product and Marketing, TDX Group

Beware the headlines: are pensioners really better off? (The perils of thinking you can ever know enough)

Last month there were some interesting reports about the state of the finances of those in retirement. On the face of it, they looked contradictory.

One Monday in February, working families learned that in spite of their hard graft to make ends meet, those in retirement were better off than they were: “Pensioner households are now £20 a week better off than working age households, but were £70 a week worse off in 2001.”

On the same day, the BBC’s deconstruction of this same report highlighted that pensioners are better off *only* when you have accounted for housing costs. It went some way to making the headlines more palatable; it makes perfect sense that those who are of working age have high housing costs so in net terms are not doing quite so well as those who, having grafted for so long, now have low (or no) housing costs.

But, by Friday of the same week, we learned the burden of debt (debt which, surely, will just never get paid off) is growing for those in old age: “One in four people planning to retire this year will still have a mortgage or other debts to pay off and will typically owe about £24,000.”

 

Looking at the data we hold at TDX Group on the demographics of those entering personal insolvency (those in the most desperate financial troubles) I found out:

More pensioners are finding themselves in financial difficulty.
Since 2010, pensioners have continued to only be a small proportion of those entering personal insolvency – but it has doubled from 3% in 2010 to 6% in 2016. I’m no statistician – but that feels significant to me.

Pensioners’ income isn’t growing – they are just exposed to less economic volatility than those of working age.
Looking at the income levels of this same group – it’s not that their income has outstripped those in work – it’s just dropped less. For those pensioners entering personal insolvency compared to those who are in work – their income has been relatively static, dropping by c£50 (3.4%) from 2010 to 2016, compared to a drop of c£300 (13.4%)  in those under the age of retirement.

 

Pensioners in financial difficulty owe more than those of working age.

Pensioners entering insolvency have more unsecured debt than those of working age – and the difference is growing. In 2014  and 2015, there was only about £1000 difference between the amount owed by these two groups; in 2016 it was £5000.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

And I’m sure that if you dig into another layer of data and information you could come up with another set of statements that could be just as complementary or contradictory.

 

Looking at all the headlines and our own data at TDX Group, I’m left with two overriding feelings. Firstly, it feels wrong that pensioners (who have fewer options to get themselves out of financial difficulty than those of us of working age) are increasingly finding themselves struggling with debt. Then, thinking more broadly, my overall conclusion is that it just goes to show how careful you have to be to understand someone’s financial circumstances in the round. Getting this holistic view has been a perennial problem for our industry and one that we just haven’t cracked yet. In theory, this is overcome by gathering Income and Expenditure information – but because I&Es are conducted and held by individual companies, as a process it can be repetitive and painful for consumers. And at what point does all this information get pieced back together so those of us involved in this industry can take responsibility for proactive responsible customer management, taking supportive action before individuals (no matter what age) run into financial difficulty so they’re not left with unmanageable debt in their old age?

 

By Kirsty Macpherson, Head of Marketing, TDX Group

Can voice recognition technology really help in the traditional world of debt collection?

Nowadays most of us are used to voice assistants, such as Apple’s Siri, Microsoft’s Cortana or Google’s Assistant in our handsets. And I doubt that many people, at least here in the UK, managed to avoid Amazon’s home solution Echo, with the integrated assistant ‘Alexa’ in the lead up to Christmas.

With these applications becoming more commonplace, many people in the tech industry are talking about voice becoming the next big user interface. The smartphone screen was the last big development before voice, arguably the tablet could be squeezed in between, but for me the concept is the same in that it’s a second portable screen.

Voice recognition is a different type of medium and has led to tech giants, such as Google and Amazon, investing heavily in research and development around voice recognition as they clearly believe in the platform’s viability.

But how could this new platform impact our industry?

You might well argue that it won’t impact our industry, after all how much did smartphones really change the way we collect overdue debt? It is true that we as an industry haven’t done much to embrace innovation in the smartphone space but it has had quite a large impact indirectly.

Without the smartphone e-collections (collections through digital means e-mails, online portals, web chat etc.) would likely have remained a much less effective channel. The smartphone brought with it constant connectivity which means consumers can be reached at times most convenient to them. It also means payments can be made anywhere.  In my opinion, without the smartphone, ‘self-serve’ portals would not be nearly as widespread as they are today.

But I digress, after all this blog is about voice and not the second screen. The truth is that the biggest benefits to collections through voice are already being implemented across the world through the use of speech/voice analytics. This technology uses software to transcribe full phone calls with ease and pick up key themes and words. It can also identify tones and trends from voices and an array of other data. Voice recognition is already helping our industry in core areas, such as compliance and call center management, and with further investment the usefulness and power of it will grow further.

The data that speech analytics provides opens up a whole new world of opportunities, enabling us to generate analysis to drive deeper customer insights, and ultimately improve performance and the customer experience. Could we find the perfect call structure? Can we leverage real-time information to prompt our agents to handle each situation more effectively? Can we recognise which agents are the best at handling certain types of calls? Can we find ways to reduce churn and improve the overall customer experience by optimising interaction? The answer is probably yes, at least to a certain degree, and the key is in the data capture this new technology facilitates.

As a data driven company, this is the part of the technology mix we feel really excited about. Speech analytics are already quite widely adopted further up in the customer lifecycle and are now starting to gain traction in our sector. Although still in its infancy, we are seeing more organisations including a number of our current suppliers adopting this new technology for the sole purpose of improving their collections operations. Compliance is the obvious first step where the technology is put to use today, but as it matures and the data is turned into insight the focus will shift towards optimising performance. This is another example of where compliance was initially seen to be a hindrance but is now helping to improve performance.

Although I believe speech analytics is the voice technology which will have the largest impact on our industry, there are a number of other ways in which voice as a platform can improve how we operate in collections, for example:

• Pre-collections: Payment reminders through new voice devices, e.g. Alexa’s calendar function reminding you that your credit card bill is due;
• Identification and Verification: Using personal voice recognition to verify someone’s identity, for example HSBC is implementing this for their telephone banking services through ‘Voice ID’;
• Artificial Calling: Leveraging voice recognition together with advances in artificial intelligence to perform collections, with the data from speech analytics providing the base for this.

Some of these solutions are currently far from reality and it remains to be seen how impactful they will really be, but I believe that voice can become a great asset helping our industry operate more efficiently and fairly for all parties. It might take some time to get there but done correctly voice could bring significant rewards to the companies who invest in this emerging technology.

Tommy Mortberg is Solution Designer at TDX Group.

2017 Predictions: What does the year ahead hold for the debt industry? TDX Group experts give their view on the themes and developments we can expect to see in the coming months.

Rising inflation squeezes disposable income

The devaluation of the pound and the fact that the new Government has signalled the end of austerity in the UK, means we should expect to see inflation creeping up in 2017. It is our view that inflation will be in the 2% to 3% range by the end of 2017 and whilst this is not high by historical standards, it does represent a significant movement when compared to the last five years.

Typically inflation impacts different consumers in different ways and won’t be evenly distributed. People living with financial difficulties or problem debt are more likely to be subject to a higher personal inflation rate than those not in debt; driven by lower incomes, higher housing costs and the rising cost of everyday expenditure like food, heating and travel.

Interest rates remain stable

If inflation does exceed 2% then eyes will quickly turn to the Monetary Policy Committee, within the Bank of England, to see whether they will react and raise interest rates. During the acrimony of the Brexit vote, some of the walls around the independence of the Bank of England began to look a little less solid and the potential for direct political involvement seemed possible.

However, it now appears that political involvement in setting the Bank of England base rate will remain indirect and it is likely to remain unchanged during 2017. This will continue to provide relief for those most indebted individuals who are especially susceptible to small movements in the base rate.

Limited real wage growth

Growth in the living wage is expected to continue towards the Government’s stated aim of £9 per hour but outside of this gradual increase, we would expect to see very little growth in UK median wage rates during 2017. The challenges thrown up by Brexit and rising import costs are likely to see UK firms focusing on cost reductions in order to remain competitive in the domestic market.

The exchange rate drop may well provide a boost for exporting firms, but whether this translates to wage growth will depend on the long-term view around the correct value of sterling. With inflation expected to grow, we anticipate that real wages will remain at current levels or marginally erode over the year. From a debt perspective, this will impact real disposable income and may well see certain groups of individuals struggling with more delinquent accounts.

Consumer spending and borrowing will begin to flatten

Against the backdrop of these macroeconomic factors and coupled with falling consumer confidence, we expect to see a decline in overall consumer spending in 2017. A “hunker down” mentality will remain in force throughout the UK and this will also have a knock-on effect for borrowing. Whilst consumer credit has been growing since the 2008 financial crisis, it is our expectation that this will begin to flatten in 2017.

Consumers with good affordability (particularly homeowners with equity) will have access to a wide range of cheap credit, but are less likely to take-on any new unsecured credit in the next 12 months and will remain focussed on paying down existing commitments. Whereas, households with lower affordability are more likely to use expensive credit products to get through the month and it is likely that where this population has access to credit they will continue to borrow.

More people struggling with bankruptcy and insolvency

There has been a significant shift in the insolvency market in 2016 and we expect this to continue into 2017. Individual Voluntary Arrangement (IVA) volumes which have been falling in recent years have suddenly started to grow as the demographic of those people utilising IVAs as a debt relief tool has changed. The average value of an IVA (in terms of total debts held) has significantly reduced and is now around 50%* of its peak average value. This decline reflects the demographic change as does the mix of creditors involved in IVA which now contains a much larger proportion of short- term, high-interest lenders.

IFRS 9 preparation and implementation for January 2018

In 2017, financial institutions will complete their preparations for the introduction of IFRS 9 (new rules on how banks and other companies that lend money should account for credit losses). This will have a fundamental impact on how lenders view their balances sheets and will trigger a range of alternative decisions around products offered, product pricing, collections and recoveries.

Under IFRS 9, financial institutions will be required to significantly raise their provisions relating to up-to-date accounts and whilst this will be the area where we see the greatest change, the knock-on effect will be most strongly felt in the non-performing loans market where creditors are expected to accelerate sale and clear non-performing loan warehouses to manage the overall provision number.

Regulatory oversight maintains momentum

We can expect regulatory oversight to continue at the rapid pace seen since the inception of the Financial Conduct Authority in 2013. The focus on fair customer treatment (specifically the most vulnerable) which is increasingly embedded across the financial services industry, will continue and this will create opportunities for those most well equipped to use data to really understand their customers’ circumstances. Evermore there will be a desire to ensure visibility of the end-to-end customer journey and continued oversight throughout the entire lifecycle.

We also expect that the changes which TDX Group has already started to introduce around Debt Collection Agency (DCA) commission structures and how we are aligning these with fair consumer outcomes will develop rapidly in 2017, as all parties realise that incentivising only on cash collected does not optimise wider outcomes for customers.

Greater demand for customer choice and creditor flexibility

This year will be interesting in relation to customer behaviour and how creditors respond to the new expectations that customers have on them. Given the continued macroeconomic turbulence expected in 2017, we are likely to see an increasing number of “new” customers entering into collections and recoveries; customers recently dubbed JAMs (Just About Managing) by the Government, who are unused to dealing with arrears and will expect a different type of engagement from their creditors. Most likely they will also want to deal with their creditors across multiple touchpoints, potentially for the same query.

Only those creditors who are fully joined up across a number communications channels (eg social media, live web chats and traditional customer service centres) will be able to effectively engage with these individuals. This capability coupled with a less dogmatic and more flexible approach to collections and recoveries will separate the best and worst performing creditors.

In summary…

…as we go into 2017, the level of economic uncertainty is probably greater than at any time since the financial crisis almost a decade ago. On 20 January 2017, Donald Trump will take office in the US in what promises to be nothing if not unpredictable. Once in office, whether he will continue his proposed policy of America First and fiscal stimulus is still unclear, but if he does it is likely to have economic consequences around the world.

Here in the UK, we have to navigate the fall-out from Brexit whilst not forgetting that the EU remains largely unstable off the back of the UK vote and ongoing budgetary and banking crises. All-in-all creating further uncertainty around the key macroeconomic indicators. In 2017, it will be these larger impact items (rather than micro industry wide triggers) that will deliver the real change across collections and recoveries, and the key focus will be to maintain flexibility around strategy and suppliers whilst also building capacity to deal with an overall increase in delinquency and default.

2017 Predictions compiled in conjunction with:

Stuart Bungay, Group Product and Marketing Director
Richard Haymes, Head of Financial Difficulties
Carlos Osorio, Director of UK Debt Recovery
Pete Parsons, Director of Third Party Government Relationships

*SOURCE: Figures based on TDX Group data from The Insolvency Exchange, December 2016.

Partner power: The way to truly optimise your debt recovery

Most large creditors, be it in financial services, energy or the public sector, use external Debt Collection Agencies (DCAs) or Business Process Outsourcers (BPOs) to collect on overdue accounts. There is nothing new about that, but what is interesting is the many different approaches and reasons a Creditor chooses to add a flexible partner into the process and how this decision can vary significantly by organisation.

Some creditors opt for third party support from as early as day one of delinquency for certain product types, whereas others have lengthy periods of internal collection activity up to day 120 and beyond, before deciding to place debt out to an external party.

Why the different approaches?

For many organisations it’s a question of resource, based on the internal capacity of the collections team or that resources may be required elsewhere. For other businesses it’s a question of risk and personally managing that customer relationship for as long as possible, in order to add value and retain control.

What are the benefits of using a partner?

When used correctly there can be significant financial benefits associated with partnering for collections, including increased levels of recovery and reduced operational expenditure. However, organisations must take care to select a partner who provides the right level of control, has the correct oversight frameworks in place to ensure that the best outcomes are being delivered for the end customer, and that risks are minimised for their business.

Technological advancements mean we live in an age where data is readily available and this data allows businesses to better understand their customer base. The unique way in which our organisation is structured, using Equifax data and TDX Group delivery capabilities, means that we know more about the relationships creditors already have with their customers and have a holistic view of their financial circumstances, so we can offer a more positive customer experience and can also provide better returns for creditors.

How does data help?

By applying analytics this data is turned into true customer insight – driving more purposeful segmentation, identifying groups of customers which can be fast-tracked to DCAs and excluding unsuitable accounts to help reduce cost and risk within your organisation.

And because we work across a wide range of industries, we can spot themes emerging and use our knowledge to devise specialist treatment paths targeted at specialist segments and drive the best performance in recoveries. For example, our data can help creditors to identify customers who are in financial difficulties, enabling them to tailor their strategy to improve the customer experience, such as signposting the person to a debt charity for appropriate advice and support. We believe that treating customers fairly not only delivers better outcomes, but can also improve performance as the customers who are unable to pay and therefore not suitable for collections activity, can be removed from that process minimising cost and removing potential brand risk.

Better insight enables companies to treat each customer in the most appropriate manner, which in turn drives increased collections, with lower risk, at lower cost and achieves an enhanced experience for customers.

So, what does the future hold?

As an industry, we need to move away from linear and rigid collections processes which define our recoveries model based on timeframe alone, into a world where a more agile approach is taken at a point where the latest information is used to drive the best-next-action.

Debt collection activity remains an important part of the consumer lending ecosystem and by partnering with the right data and technology provider, creditors can improve recovery rates whilst also retaining oversight and ensuring that the best interests of customers remain front of mind.

Matt Wallis is Solution Designer at TDX Group

Collaboration and communication: the key to crystallising customer needs

Having managed products in a range of industries from media to finance, there is one thing which I’m always asked: “How can we launch the next big industry changing product?” Which means I’m continuously on the lookout for the next game changing, industry leading innovation which will impress our customers and partners. Product managers are always under pressure to be innovative, it’s part of the job description, but the risk is that innovating for innovation’s sake often results in products that may please the developer because they use the latest technologies and the sales team because they have something new and shiny to present to potential customers, but it won’t do what all products should strive to do – solve a problem for a customer. This should lie at the heart of everything we do.

On a recent training course we were asked what we would do in the following scenario. In one hand we had one orange and in the other hand we had two demanding customers both asking for the orange immediately. This was the only orange in the world, so what could we do in this situation to satisfy both customers? My colleagues and I came up with a whole whiteboard full of options for how we could best use the orange. We could cut it in half and get them to share. We could use the seeds from the orange to grow more oranges. We could even eat the orange ourselves and pretend there was no orange to begin with! However, none of these options would result in a satisfactory outcome for the customers. In the end the answer was simple. What we needed to do was ask the customers what they wanted the orange for. This would have resulted in the first customer saying they wanted the peel of an orange to make candied orange peels and the second customer saying they wanted the juice of an orange to add to a cake recipe. In this scenario knowing the problem that these customers were trying to solve would have resulted in the single orange satisfying both of their needs. Simple!

Product management should be all about problem solving and really getting under the skin of what the needs and frustrations of our customers are (regardless of whether those customers are internal or external). All too often customers ask for a specific solution, and in order to please them we build the requested solution only to find that it doesn’t quite do what the customer really needed. Customers are experts in their business line and we are experts in ours. The best products therefore should be created collaboratively with the customer detailing the problems they are trying to solve, providing us with the full context and our teams proposing creative solutions based on industry knowledge and the right technologies and systems.

Regardless of how well we think we know our clients’ needs or because we have worked in the industry for years, nothing beats “voice of the customer”. At TDX Group, we use voice of the customer ourselves and recent developments to our TIX (The Insolvency Exchange) platform are based on feedback from clients and this has delivered improved functionality for all TIX users.

The simplest way to understand what a customer needs is by asking the right questions. This isn’t necessarily: What do you want? It can be: What is the problem you are trying to solve? How are going to use the product? Who is the end user? What are the impacts of rollout and implementation likely to be?

The key then is not just taking the customers word for it. Findings should be backed up with data so that a real benefits case can be created, with tangible metrics that can be used as measures of success, whether that’s cost saving, time saving, reduced complaint levels or improved liquidation rates.

The customer should also be taken on the product development journey by delivering the product or functionality in prioritised increments so that releases are de-risked, benefits are delivered faster and the customer can provide a continuous feedback loop.

It’s this collaboration and being really clear on what problems the product will solve which will really drive innovation and enable organisations to meet the right goals. When a customer asks what a product can do, it is the value proposition that they care about not the product features, and if we are innovating the right product for our customers’ needs we should be able to demonstrate that value proposition in an instant.

Shivani Mistry is Head of Platform Management at TDX Group

Asset Sale: Honing in on non-performing loans

The global asset sale market continues to grow, and within that TDX Group is already an established player in valuation and brokerage services in the unsecured market within the UK, and both the secured and unsecured markets in Spain. As a business we’re expanding this reach into a more globally focussed and structured asset sale function spanning the wider Equifax network and territories.

At a global level one of the greatest challenges, and opportunities, in this space is how to deal with Non-Performing Loans (NPL). In Europe alone, the largest banks hold approximately €1.1 trillion* of NPLs according to recent KPMG analysis.

The NPL problem is now a global one, and what to do about it is challenging Governments across the developed world. In some key countries such as the UK, Ireland and Spain they created organisations dubbed “bad banks” (UKAR, NAMA and SAREB) to manage the problem, whilst Greece and Brazil have changed entire legislative systems to allow the sale of NPLs.

The major difficulty in most countries is the experience and market structure needed to be able to execute NPL sales in a successful manner. NPLs are somewhat of an anomaly in that market conditions are different in all geographies, but that there are also some core similarities which need to be understood locally in order to succeed. At TDX Group, we’ve been operating in this space for 12 years, and have successfully executed more than one thousand transactions with a value of over $20 billion, and this experience will stand us in good stead as we now focus our efforts on a global scale.

How developed is Italy?

With the UK and Spanish markets having already developed, the race is on to find the next market which has the volume and infrastructure to support new growth. Italy has dominated the headlines recently but this market has found it difficult to develop a successful servicing model. Now that the Atlante II fund has been created (the second attempt by the Italian Government to try and bring some liquidity to the market) will this allow the market to establish some of the parameters to function or just add to the issues in an already fragmented market?

The Economist ran with a headline of “Bargain Hunt” in August which suggests that this market may need some support. One of the key areas discussed at a recent summit hosted by Banca IFIS in Venice was that of the Italian legal system and it was claimed that solely by reforming this you can add single digit percentage points to the Italian gross domestic product.

One of the essentials when working with funds and servicers is ensuring that the collections curves are genuinely achievable and the challenge with any new market is the ability to create balance between expected value from the seller and realistic returns from the buyer. The challenge in Italy will be weighing up state backed entities and their returns versus true returns for an investor.

Into Europe or an American adventure?

There has been a lot of talk about other developing markets in Europe and while there are undoubted opportunities to be had in Central and Eastern Europe a number of the markets do not have the large scale volume needed to replicate the UK or Spain. At TDX Group, we’ve taken on projects in Poland and Russia this year and looked at transaction in Greece; where the new regulatory framework for NPLs and the creation of Law 4354/2015 has enabled financial services organisations to consider wider disposal of certain assets.

Finally, another developing market for consideration around NPLs is South America, where we are already actively managing projects in Brazil, Peru, Mexico and Chile. The breadth of opportunity that exists here is very significant as the basic market for NPLs already exists, so bringing in skills and expertise from more developed markets can make a huge difference. In addition, some of the main purchasers are already active in South America (such as PRA and Encore) and we’d expect their presence along with the investment funds to accelerate the expected market growth.

The asset sale market is evolving and we are likely to see a number of exciting developments over the next 12 months – so watch this space.

Nick Ollard is Director of Global Asset Sale Services at TDX Group

 

*https://home.kpmg.com/xx/en/home/insights/2016/05/non-performing-loans-fs.html

Debt Market Integrator: Why Her Majesty’s Government decided to act on burgeoning overdue debt

Debt is always going to be an emotive and sensitive issue as many different types of people and businesses fall into debt for different reasons. The biggest area of debt in the UK is money owed to Central Government, which is estimated to exceed £25 billion (of which £5 billion to £7 billion is over 90 days old), and originates from many sources including unpaid fees, taxes, fines and loans, benefits or tax credit overpayments, and unrecovered costs from court cases.

In 2010, the UK Government announced its commitment to addressing this problem and improving debt management by setting up a Fraud, Error and Debt taskforce. The unit set out its vision and roadmap by publishing an interim report in February 2012. This was followed by a National Audit Office and Public Accounts Committee review in 2014, which confirmed that there was no integrated approach for managing debt across Government, and that too much overdue debt was being allowed to “age” leading to value erosion.

To remedy this, a public tendering process was held and a joint venture was formed between Government and TDX Group in 2015. The company, named Indesser, provides Government and the wider UK public sector with a single point of access to a wide range of debt management and collection services.

Government can now access services as a single customer, presenting a significant change from 2012 when the Government had over thirty separate contracts for managing debt. In addition, Indesser is set up as a streamlined process, with the fair treatment of individuals in debt at the heart of what it does.  Ensuring that individuals are removed from the stress of having multiple debt collection agencies and parts of Government, approaching them in different ways.

Since going live in mid-2015, Indesser is widely acknowledged to be exceeding expectations and has provided the Exchequer with greater returns than forecast in the original business case. Indesser aims to grow its UK Government services and footprint in the coming months and to use its experience and expertise to help Government’s outside of the UK to address similar challenges. A vision which is strongly supported by the Cabinet Office and the Indesser customer departments.

Sunil Shahaney is Director of Government and Public Sector at TDX Group

The dawn of a new era for debt

As the economic outlook for the UK continues to change based on the result of the EU referendum and greater global uncertainty, we can expect to see a whole new wave of consumers entering the arrears space over the next 12-24 months. These people will have little or no experience of adverse credit, but may find themselves increasingly squeezed by low real wage growth and rising prices, so could fall into debt for the first time.

Following the UK Brexit vote the Bank of England has reduced interest rates, but a 0.25% shift will make very little difference to the behaviour of most high street savers or borrowers. However, this cut is likely to further exacerbate the downward pressure on sterling which will ultimately make all imported goods in the UK materially more expensive and further squeeze consumers.

Over the last few years, consumers have benefited significantly from low interest rates which have ensured affordable mortgage repayments. However, rising import prices are likely to have a material impact on the Consumer Price Index and could ultimately force the Bank of England to reverse its recent interest rate cut and begin increasing rates to maintain inflation targets. This is likely to lead to some difficult choices for the Bank of England over the next 12 months, between measures aimed at stimulating the economy and measures aimed at cutting inflation. We could even see 1970s style stagflation emerging once again!

What does this mean for consumers…

Low growth and rising rates is a perfect storm for the UK’s consumer-focused economy. This combination will further squeeze disposable income for most and will disproportionately impact the middle classes; a group that (in the main) have not previously encountered debt problems and have managed to keep multiple obligations up to date. As real disposable income falls, some of this group will be forced to make hard choices for the first time, regarding which payments to maintain and which to temporarily halt.

…and for creditors?

The situation presents a unique problem in how to manage good, loyal customers who historically have no payment issues but may now fall into short to mid-term debt problems. Creditors will need to use all available data to really engage with these customers and most importantly adopt a longer term “through the cycle” approach to any current debt issues. Creditors who look to follow normal processes to recover debt may well find these customers reluctant to engage and ultimately unwilling to return in future when their debt issues have ended. This is a classic short term recovery versus long term value problem, which only the most progressive creditors will be able to solve.

Stuart Bungay is Group Product and Marketing Director at TDX Group

Bank of England interest rate cuts: A TDX Group view

On 4 August, the Bank of England cut interest rates for the first time since 2009, from 0.5% to a record low of 0.25% and also announced the biggest cut to its growth forecasts since it began making them in 1983. These measures designed to stimulate the economy come off the back of uncertainty caused by the EU referendum result and downward pointing economic markers, like the Purchasing Managers’ Index (PMI). Most importantly, these cuts in interest rates will affect banks, savers, pensioners, the housing market, and ultimately touch every individual in the UK and further afield.

So, who will be the winners and losers as a result of this cut?
An interest rate cut is one lever the Bank of England can pull to attempt to rouse the UK economy, but the situation clearly creates winners and losers depending on an individual or a household’s financial circumstances. Mortgage-holders will see some benefit so long as they aren’t on a fixed rate. Savers and pension-holders will see a decline in their earnings as rates drop. Whilst most loan-holders and credit card debtors won’t see any changes as those rates tend to be fixed.

A turbulent economy creates uncertainty and an increase in the risk associated with it. So, if that is the case, it is likely that debt will become more of a focus for lenders and more to the point the servicing of that debt.

If all goes to plan the stimulus will fuel a consumer-led economy and signs of a healthier economic climate should become apparent. There are risks though. In the long term the low interest rates may tempt homebuyers to stretch themselves to buy, storing up an issue if rates rise again in the future.

The immediate risk is the falling Sterling rate and the impact that will have on the prices of goods and imports. There is likely to be more immediate hardship that will come from the inevitable price increases which will flow through to the consumer and impact their spending.

What does this mean for creditors?
It’s still a little too early to say. Both challenges and opportunities exist within an ever changing economy and how these are likely to play out depends on who you listen to or which article you read.

The underlying decline in Sterling will make goods imported into the UK more expensive ultimately driving up prices for consumers. This creates a risk around reduced disposable income to meet credit payment obligations and a longer term risk around the impact on mortgage repayments from interest rate rises to combat those growing prices.

The impact of increasing debt levels due to customers being unable to pay them down, the increasing levels of hardship and vulnerable customers and the increase in arrears will mean creditors really will have to get to know their customers and their behaviour in more detail.

They’ll have to look at their contact strategies, customer communications and perhaps take a longer term view to rehabilitation and repayment. A one size fits all approach will not be effective in a situation where many creditors are competing for the same debtor pound for repayments.

How can TDX Group help during this turbulent time?
Creditors need to get a head start on their competitors by better understanding their debt portfolio, the behavioural characteristics of individual customers and how best to compliantly collect on arrears. If you’re a creditor who would like to discuss the impact these changes could have on your collections and recoveries strategy please get in touch at my LinkedIn address below.

Richard Anderson is Head of Advisory at TDX Group

Stay vigilant! The best way to help consumers during uncertain economic times.

A few weeks on from the UK’s biggest political decision and the rate of change hasn’t slowed down for a second. We’ve witnessed everything from a Prime Ministerial change, an opposition leadership contest and changing of the guard in front bench politics. 

What does this mean for our economy longer-term? Well, it’s probably too early to say and the outcome of all this change will unfold over the next few years. One thing is for sure, it’s likely to present us with both challenges and opportunities.

So now I’m beginning to think a little closer to home, about the impact these changes could have on people living with financial difficulties and a few things stand out for me.

Firstly, the Governor of the Bank of England, Mark Carney, recently hinted that fresh stimulus measures are need to re-invigorate the economy, including potentially cutting interest rates¹.  This clearly has pros and cons.  For people with variable rate mortgages this will be positive news and provide some additional relief.  For consumers managing their financial difficulties through a debt solution like a Debt Management Plan (DMP) or an Individual Voluntary Arrangements (IVAs) – our data shows that 40% of people in IVAs have mortgages – it will help with sustainability and could enable them to increase their repayments. However, for those people living on income from pensions or savings their finances will be squeezed and they may be more likely to struggle.

Secondly, the pound has dropped against the US dollar which is likely to drive up inflation over time. For people living with or at risk of financial difficulties this may result in a higher cost of living and put them at greater risk of unmanageable debts. A recent survey by YouGov² showed that ‘a third of middle-class people would have to borrow money to pay an unexpected bill of £500’. For people already managing their financial difficulties through a debt solution, could lead to an increase in broken arrangements.

However, this may be balanced by the news that the Treasury has abandoned targets to restore government finances to a surplus³ by 2020, as a result of the requirement for additional borrowing to ensure economic contraction, which could slow the rate of contraction of the welfare state and balance some of the impacts of inflation.

The Money Advice Service published research in March which highlighted that ‘one in six people in the UK is over-indebted, but less than one in five of them seek debt advice⁴’ and BBA retail banking statistics show that unsecured borrowing is growing at a rate⁵ of 6%, coupled with low wage growth and the contraction of the welfare state – all of which begin to place an even greater burden on consumers.

Research by debt charity, StepChange⁶, shows that 50% of people with debt problems tend to wait at least a year before seeking advice, so the most effective way to support consumers during these uncertain times is to look out for early warning signs. Creditors should act quickly to most effectively target their support at the people with the greatest need and put treatment paths in place which both reduce the chance of financial difficulties and provide repayment solutions which can be effectively managed.

So, what should creditors do to support their customers?

1. Use internal and external data to identify customers who are in or at risk of financial difficulties. Whilst your customer may be managing their credit commitment with you effectively, they may be struggling with others. Without reviewing external data the first thing you will see is a customer disengage and move swiftly through the collections and recoveries process.

2. Develop strategies for these customers by proactively engaging them to offer additional support. Taking action early gives your customers more options and simple action now can avoid longer-term problem debt which normally results in recoveries action. If creditors don’t engage and support their customers it is more likely that they will seek debt advice, including accessing personal insolvency solutions, this can often be the right solution for customers but at this point creditors only have limited control.

Richard Haymes is Head of Financial Difficulties at TDX Group

Sources:
1. Pound falls as Bank of England hints at fresh stimulus measures, 30th June 2016 www.bbc.co.uk
2. Third of middle classes too short of cash to pay a £500 bill, 7th June 2016 www.thetimes.co.uk
3. Osbourne abandons 2020 budget surplus target, 1st July 2016 www.bbc.co.uk
4. Press release: One in six adults struggling with debt worries, 10th March 2016 www.moneyadviceservice.org.uk
5. May 2016 figures for high street banks, 24th June 2016 www.bba.org.uk
6. Waiting for debt advice www.stepchange.org

Let’s talk contact not placements

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

Working at TDX Group: the science of process improvement

It’s 2016 and surely everything that will be invented has been (apart from teleportation and time travel)? We know how to do everything the best way and with the best methods and tools and everything is just a re-hash of an old method – Spotify for example, just a do it yourself radio station!

So why worry about trying to improve things? Why try to find a faster, cheaper, better way of doing our jobs? Surely it’s just better to get on with the work, answering queries, chasing clients, producing our products and providing client services. Change just messes things up, slows things down and confuses people and no changes ever stick longer than a week, or a month at most, then people just get bored and go back to the way things were … Sound familiar?

It’s natural to fear change, to upset the routine and rhythm of daily life – you probably don’t have time in the working day to implement a change and why should you? It’s not your job to help improve things; your job is to get stuff done and out the door so SLAs are met, targets are hit and services delivered.

It is easy to get stuck into this way of thinking and to focus on the short and immediate term but if this really was the case then why invent MP3 players when the Walkman was perfectly fine; why go to the Moon when the Earth is doing an excellent job at providing an atmosphere; and how are sport stars constantly breaking records?

Process improvement is the answer and it doesn’t matter how big or small a change can be to improve things. Marginal gains are just as important as huge ones and often add up to a bigger overall improvements. The British Cycling team is probably the most prominent example of this and Sir Dave Brailsford’s belief is that changing many things by 1% would add up to a significant increase when you put them together: Marginal gains underpin Team GB's dominance.

But how do we translate this from the world of sport into the world of TDX Group? Firstly we look at every process and ask why we are doing the thing we are doing; does it add value to anyone? Could we do it a better, faster, cheaper way?  Then we need to look at how often we perform the process or task; is it daily, weekly, monthly etc? If there is no value in this then we suggest an amendment to ultimately deliver a faster, better more efficient process for our customers.

Process improvement is already here and has been for centuries – it (along with necessity) is the mother of all invention and is the reason why companies grow and at TDX Group we are continually improving everything we do and embedding a LEAN culture of process review to improve the services we provide.

Paul Sibley, Head of IT Process Improvement

Tony Palminteri, Lean Process Improvement Specialist

How do you report on your customers post sale? Whose best interest are you considering?

Reporting to credit reference agencies (CRAs) on your customers’ accounts post sale has been one debated by the industry for a number of years. The process of how this is done is often based on what is deemed the easiest and quickest solution, meaning there is no one standard approach. We believe this inconsistency is unfair. It feels as if this is one of the last hangovers from the days where highest price and speed of transaction (ask no questions) were industry standard practice.

The inconsistent approaches adopted can mean consumers find that what is recorded on their credit report is dependent on who is selling the debt and who is buying it. In a world where customer treatment and fair outcomes are at the heart of everything we do, is it right that the sale of an account may show up differently on one consumer’s credit report compared to another, depending on which companies are involved in the process? The impact of this is that their ability to manage their financial affairs will vary.

There are currently three accepted methods in the industry on how a credit record can be transferred from a seller’s to a buyer’s CRA portfolio. They are:

1. Delete and re-add – this is where a seller will delete the entire credit history and then the buyer will re-add the account, with no history in their monthly CRA submission
2. Full Transfer – this is where the complete credit history is transferred by the CRA from the seller’s to the buyer’s portfolio
3. Flag and re-add – this is where a flag is marked on the sellers record indicating the account has been sold and a new record is opened by the buyer

It is common practice to see all three of these methods being regularly used throughout a single year of transactions. Steering Committee on Reciprocity (SCOR), the industry data sharing oversight body, has issued guidance putting the responsibility on to the sellers and buyers to agree a process. However, at TDX Group, because we act in the centre of the industry, working with buyers and sellers on transactions, we have seen issues with all of the methods and none of them have proven to be fool proof. Some examples of problems include: duplicate records being live for a consumer; no records being available; or the flag not being marked before the new record is uploaded – all of which have a different impact on the consumer.

At this stage we are not calling for one method over another, although we do believe it is time to stop option 1 (delete and re-add). This is the method we often see employed because it is the most straightforward process, and yet the impact on the consumer hasn’t been fully assessed. If you asked creditors how they would treat a customer who had an account on their history which started with a default – what do you think the answer would be?

What we are calling for is the industry go through a considered review and ensure that all parties thoroughly understand the impacts; not only the impact on a customer’s credit record at point of sale, but also for the following years thereafter.

The outcome we are all striving for is one of consistency – that is what we ask of our regulator and we believe it only fair that we strive for the same outcome in our processes. In 2016, with the majority of our industry having achieved or nearly achieved FCA authorisation, it seems totally at odds that consumers could be disadvantaged depending on which Debt sale process they find themselves in.

Nick Ollard, Head of Debt Sale, TDX Group

Global outlook: Debt trends in the international arena

In the 12 years since the TDX Group business was formed, we have grown from being a start-up around a kitchen table to part of the global Equifax group with offices around the world. Today, TDX Group operates in Europe, Central and South America, Asia and Australia, and we have ambitions to further develop our expertise and international presence over the coming years. The International team spend a lot of time out on the road (and in the air) exploring new opportunities globally and here are some of the key market trends we’ve observed.

Debt sale and purchase
In debt sale and purchase we expect to see continued expansion into Europe from the large UK debt purchasers, which now includes both Encore and PRA. The continued contraction of the US debt sale market is forcing these large purchasers to explore new markets to acquire portfolios. Initially that was the UK, but with constrained volumes being sold and significant competition, European and emerging markets are looking increasingly attractive. As a result, I expect to see a significant growth in acquisitions amongst these players across Europe; but especially in the Netherlands, Eastern Europe and Italy. Within the Eastern European and Italian markets, it is the big US funds and institutional investors who have purchased first due to the size of the portfolios. We are now starting to see the more traditional Debt Purchasers enter the market and begin to purchase smaller portfolios or segments.

Further afield, the continued economic downturn in Brazil is changing the recoveries dynamic in that country opening up opportunities for experienced buyers to enter the market. In Brazil, especially, market entry strategy will be key to accessing what is normally a difficult market to develop. In Australia there are currently over 20 active purchasers, so we’d expect to see some consolidation in this area and the global purchasers beginning to make acquisitions in this territory.

Recoveries and debt collection
From a recoveries and debt collection agency perspective, the clear differential between the UK/US and the rest of the world is becoming increasingly apparent. The focus on governance and fair consumer treatment, whilst present in most global markets, is not the focal point for activity outside of the UK/US. That said, there are creditors and collection agencies in global markets watching the regulatory driven change closely to understand how the focus on fair consumer treatment can improve overall performance as well as offering better solutions for their customers.

High level themes over the last 12 months:
• Debt Collection Agencies (DCAs) are being retained by creditors’ procurement teams looking for low cost, not maximised net liquidation. As a result creditors are tending to underpay agencies and then get disappointed with results.
• Defaulted/disconnected debts are treated as homogenous blocks. As a result, creditors all too frequently randomly allocate accounts to DCAs.
• DCAs are beginning to embrace digital strategies (largely driven by the first bullet).
• DCAs are increasingly using external data to improve contact rates.
• Creditors are still not utilising all their internal data in recoveries to inform agency strategy.
• DCAs need to better understand their specific specialism and use it to their advantage.

The future in this space will be dominated by the creditors appetite to invest in agency performance (from a commission cost and time perspective) versus simply selling the debts to third parties who are prepared to invest to access the performance reward. The more agency commissions are driven down, the further performance will decline which will ultimately make sale an increasingly attractive (although perhaps not value maximising) option for creditors.

Stuart Bungay is Managing Director of International Expansion at TDX Group.

How rewarding DCAs differently could help us achieve the best outcomes for customers

At TDX Group our vision is to “make the debt industry work better for everyone” and when we say “everyone”, we mean it.  In the Third Party Commercial team this means that remuneration, rewards and incentives should be aligned with achieving a resolution for the consumer and the client, but that’s not where it ends. We want commercials that reward our agencies for the excellent work that they do too!

Personally, I don’t believe the current commercial model entirely supports that vision, mainly because the outcome measured by the payment by results mechanism is biased towards cash collected.  This is standard across the collections industry but the tide is changing.  Not only are we seeing an increase in outcomes that are right and fair, and don’t necessarily result in payment – such as identifying vulnerability – but these also lead to increased workload for which agencies are not directly rewarded, which is why change is needed.

Clients and agencies alike are interested in measuring other outcomes and agree that there needs to be commercials in place to support this.  However, alternative commercial models seem complex and risky, so how do we move from a commission-only model to one which ensures that the consumer has a resolution to their debt problem, rewards agencies for achieving fair outcomes, and provides the client with the remuneration for services/goods provided?

I think the answer lies in getting smarter upstream with data, and that’s where TDX Group comes in. We are currently working on new style segmentation using Equifax data which will enable us to identify segments of debt where the right outcome may not be collecting cash.  This is where we will select the right commercials based on the work involved and the outcome desired.  But what about where the objective is still to secure payment in a fair manner?

This is where payment by results still works, but we need to take the emphasis off cash as the only result which is rewarded.  The “result” can be a multitude of positive outcomes which lead to a resolution of the debt.  I think this is where a scorecard approach to commercials works particularly well.  The payment element is aligned to ensure that agencies are incentivised for providing fair outcomes and better consumer treatment.  I also like that we are able to define what a good outcome looks like, and reward this appropriately.

At TDX Group, we’re working on a commercial scorecard which ensures that consumers get a resolution to their debt in a fair way, and even when that doesn’t mean paying the debt, agencies are rewarded for the part they play in the resolution.  All it means is that the process of resolving debt becomes fairer for all and TDX Group can continue our journey to “make the debt industry work better for everyone”.

Charlotte Mather is Head of Third Party Commercial at TDX Group

Investing in ISO: Why it’s an important quality mark for our business

I joined TDX Group a year ago and during that period have been leading the charge to get a serious amount of International Organisation for Standardisation (ISO) certifications under our belt.  We’ve invested a considerable amount of time and effort into our ISO programme in order to achieve a number of new certifications for the business. We’ve made some incredible progress so far and have already managed to achieve three of the most substantial awards.

What is an ISO certification?
ISO is an independent, non-governmental membership organisation.  In its 70 years of existence, ISO has developed thousands of internationally recognised standards in wide ranging business practices.  Recognised in 162 different countries, ISO is the world’s largest developer of voluntary international standards.

But, what are  the benefits of ISO to us, our clients and our partners?
International standards make things work better.  They give world-class specifications for products, services and systems, to ensure quality, safety and efficiency.  More specifically to us here at TDX Group, these standards are really important to both our business and to our clients.  They give our clients, partners and stakeholders confidence that we’re operating in a specific way, to a high standard, that is aligned to a global benchmark.

So, what have we achieved so far and what do these certifications stand for?

ISO9001 Quality Management
This is a systematic approach which defines how you can measure and manage the quality of the work you produce, and over time, realise the benefits of continual improvement. Originally born out of the manufacturing industry, this is globally the most widely used ISO standard. Our entire Recoveries Management business is certified to ISO9001 standard.

ISO22301 Business Continuity
This is a systematic approach which helps you understand and prioritise the threats to our business, and as a consequence, build plans, test effectiveness and overtime, improve the resilience of our business. The TDX Group business is certified to ISO22301 standard.

ISO27001 Information Security Management
This is a systematic approach to managing sensitive company information so that it remains secure. It includes people, processes and IT systems by applying a risk management process. The TDX Group business has been certified to ISO27001:2013 standard since 2011.

There will be more…
As a trusted intermediary at the centre of the debt industry, maintaining high standards forms part of the fabric of who we are.  We’re extremely proud of the certifications we’ve been able to achieve so far, and remain fully focused on attaining more ISO accreditations in the near future.  So watch this space!

Natalie Tate is Head of Operational Transformation Excellence at TDX Group.