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

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

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

All caterpillars are butterflies on the inside: an intern's view of working at TDX Group

Spot the odd one out – 1) Bungee jumping. 2) Quad biking. 3) Working in the debt industry. 4) Swimming with sharks. I bet you chose number three, didn’t you? Presumably because it appears to be dead boring… right?

I currently find myself halfway through a two month internship with TDX Group, and I have to say, it really is quite the opposite of boring. Being a student of Ancient History, the debt industry is a brand new field to me, and I will admit that I did have my worries about how I would take to it, or to be brutally honest – would I actually like it!

It turns out that my fears were completely unwarranted. Instead of counting down the clock each day, I’ve found myself thrown deep into a world filled with exciting and unpredictable variables, challenging regulations that demand constant attention, and best of all, countless opportunities to stretch myself and produce work that I know has a significant end result.

From day one I’ve been given stimulating work to do, work that I get excited about seeing through to the end. I actually find myself feeling sad that some of the projects that I have been working on won’t be completed until after my internship finishes! Now admittedly, the debt industry may not be to everybody’s taste, but for me at least, it certainly falls into life’s ‘don’t knock it until you’ve tried it’ category.

What has really made my time here so enjoyable though, are the company and the people that form it. Everybody I’ve met has been extremely passionate about their work, and has been kind enough to take time out of their busy schedules to bring me up to speed on their role within the company. Whilst there’s a lot to take in, everyone loves being asked questions about their particular specialism, and nobody lets ego or stature get the better of them. There is also a great sense of being a team within the office, with even the most senior of management sitting in the large, open plan desk area. Even during my short time here I have noticed the positive effects this has; it’s little things like that which help to really make TDX stand out from the crowd.

I know full well that I’m extremely privileged to have had the opportunity to be spending my summer at such an exciting and interesting company, and have learnt a lot during my time here; insights and knowledge that I know will stand me in good stead wherever life may take me.

If this is how I feel only coming up to the halfway mark of my time with TDX, then I’d say things are looking very good for the remainder of my internship! If you’re reading this as a student, then I urge you to consider doing a summer internship, the skills and experience you pick up are invaluable in the job market place. If you’re reading this as someone specifically researching TDX as a workplace, then I can assure you that it truly is an excellent place to work.

Until next time,

James Bradshaw, intern at TDX Group

N.B. I’ll be writing a ‘conclusion’ to this post as I finish my internship, so make sure to check back towards the end of August for that.

The Cost of Compliance

At a recent meeting I was asked if I knew of any work available on the cost of compliance to our industry. On the train home I had plenty of time to reflect on the question and how our industry operates.

In the ‘good old days’ collections was all about getting the money quickly. Pushing for payment in full first, if this was not possible then it would be two instalments and slowly extending repayment periods. Key collections metrics for agents were average payments and promises kept among the normal operational metrics. More often than not a debtor has more than one debt, and it was a competition to get to their disposable income first so yours got paid first.

The push for higher payments and short repayment periods meant that many promises were broken along the way, as they were never really affordable in the first place. Even if a customer  could afford the current creditors payment scheme, as soon as the next creditor got in touch and convinced them to pay them then, once again, the previous creditor’s scheme became unaffordable and the arrangement would be broken.

If you were consistently the first creditor in conversation with the debtor and always managed to get payment in full then you would not want this system to change. For all the others, broken promises teams would have to re-engage the customer and start the cycle again, and operational expense was certainly not optimised.

The principle of the current compliance regime is affordability, we can all argue what should be reasonable expenses to include in calculating this – I often do - but we cannot argue with what is trying to be achieved. Ensuring the debtor can pay off their debts as quickly as possible in a sustainable way is in everyone’s interest.

There will always continue to be debate on how we do this:
• Do we need to do an income and expenditure (I&E) to assess affordability for every customer each time we agree a payment in collections?
• Should we do a full I&E each time we make a loan? I have recently taken out a mortgage and have been asked fewer questions about my income and expenditure than I would get if I wanted to pay a debt off in a collection agency.

Ultimately,  the principles of compliance are not the ones costing the industry, it is the interpretation and application of these principles which are. It is this balance which we should continue to focus on to get right. If we could do this, the question I would have been asked is ‘what is the cost of not being compliant’?

By Nick Georgiades, Director - Advisory Services, TDXGroup

4 tips to ensure compliance and performance – a lesson from the gentleman’s game

In 2003, England won the Rugby World Cup; the first time a northern hemisphere country had ever won. The team that took the trophy home was clinical, disciplined and professional. Getting to that point did not come by mere chance; it was the culmination of several years’ worth of dedication from a group of coaches, players and mentors putting in place the right fundamentals to ensure ultimate success.

Coach Clive Woodward had strict rules for his players. He insisted that all players were ready for pre-arranged meetings 10 minutes early, that they dressed smartly at all times, that their language was clean in public areas, that mobile phones were only allowed in players' rooms….. and the list went on. Woodward argued such "critical non-essentials" make a huge difference in business, sport and, indeed, life.
So, how does this relate to debt?

In April 2013 the Financial Conduct Authority (FCA) came into being, with new powers to ensure that financial services companies demonstrate and measure the fair treatment of customers, and prove how this results in fair outcomes for each individual customer. In order to meet the standards expected by the FCA, taking a leaf out of Sir Woodward’s book would certainly do no harm.

1. Fix your platform
There was no doubt in anyone’s minds that if a game of rugby came down to the last 10 minutes, Woodward’s team would be the fitter, more physically adept team, and would close the game out.  It was this confidence in their foundation - the platform if you will - which ensured that when it came down to crunch time his players would win the battle in every situation. This is true in most situations, including debt - if you only have tools that allow you realise 60% of the benefits, you need to look for ways to quickly access that extra 40%.

2. Know more
Woodward had teams of analysts studying teams, players and tactics, which, in the end, revolutionised the way in which international teams approached test match rugby. Taking a leaf from his book, if you continually try to understand more about your customers in arrears and learn how to use that knowledge to ensure fair treatment, improved performance will naturally follow. For example, do you currently know which of your customers is already paying one of your existing DCAs? What additional data could you gather to help make contact? What is the level of activity your agencies are undertaking? Too little activity and you run the risk of poor performance, yet too much just simply isn’t fair to the customer. There’s a fine balance between efficiency and harassment and you need the tools to undertake this balancing act.

3. Use the power of prediction
Studying team decision making when in play can help you here - how does England counteract and premeditate opponent moves on the field? By always being one step ahead and using intelligence instead of pure brute strength.  So, what are your tactics with debt? Do you understand how your customers will respond to different forms of contact? Knowing how customers react in situations and being able to premeditate is a powerful weapon in your arsenal.

4. Focus on the prize
Woodward had a goal in mind; everything he and his team did was with the single aspiration of being the best team in the world in 2003. Similarly, within our industry we have an impending deadline of 2016 – the date the FCA regulations come into play. The opportunity exists now to ensure you are best prepared for this day.

In summary, every team and every business has great aspects, but it’s the ability to identify the areas where improvement can be achieved, and the prospect of excelling in every department that sets the world-class apart from the ordinary. Just ask Woodward!

By James Breadon, Business Development Manager, TDX Group

6 tips for incentivising the right behaviour

My 13 year old son plays centre forward for a struggling local football team.  They’ve recently finished a tough season during which goals – never mind victories – were a rarity and they finished bottom of their league.

Mid-way through the season my son asked me for a new phone. Because I’m not as skilled as his mother at saying “No,” following several weeks of nagging I made one of those spur of the moment, ill-conceived parental promises. “If you score a hat-trick between now and the end of the season you can have one.”

Given the season they’d been having I thought I was on pretty safe ground.  Besides, what was the worst that could happen – my son would try that little bit harder and help his team scrape a much needed win?

So – did Dad’s little incentive scheme have the desired effect or were there unintended consequences?  In summary, no and yes! Some of the most noticeable changes in behaviour were:

• My son was never the most generous team player, but now he stopped passing altogether in favour of speculative goal attempts from all pitch positions (running back to help the rest of the team was another casualty of his new found focus).

• His team mates started to get a bit resentful and some of them stopped passing to him.

• The resentment even spread to some of the other boy’s parents who were getting grief from their kids about my son’s potential bonus and the lack of theirs.

So what’s all this got to do with effective collections?

Well, in the Advisory team we spend a lot of our time reviewing the effectiveness of creditor’s collections and recoveries operations.  In the same way as my well-meaning incentive scheme didn’t necessarily drive the right behaviour in my son (or help his team), we see numerous examples of incentive schemes and structures within collections operations having unintended consequences.  For example:

One creditor we worked with boasted about their high collection agent retention rate and ease at which they recruited new agents from a competitor down the road. This was linked to the fact that their agent remuneration package was heavily weighted towards a relatively high basic but with limited scope to earn commission for over performance. It transpired that all the best collectors were working for the competitor who offered a lower basic salary but where the OTE was much higher.

In another creditor we saw the best performing agents were those who were automatically writing-off a debtor’s fee and interest on every call (doing this counted towards the agent’s revenue target.  It was meant to be only permitted as a last resort but the absence of appropriate checks and MI meant that the best performing agents were exploiting this loop hole).

Another organisation we worked with offered no commission scheme at all to collection agents on the basis that, “The Union doesn’t like the idea of some agents earning more than others at a certain level.” The resultant collection rates were poor.

On another, call handle time was a key measure without appropriate control, we found that some agents were hanging up on calls at the end of the day to hit their target.

What are our 6 tips for an effective collections incentive scheme?

1. Ensure incentive schemes are aligned to company objectives
In our experience, measuring agents across a series of broad categories of behaviour which drive a balanced incentive scorecard works well and ensures alignment with broader company objectives and the right agent behaviours.  The combination of behaviours we see agents measured on most commonly are effectiveness (e.g. amount collected), efficiency (e.g. volume of work carried out/productivity) and quality (e.g. adherence to process/compliance).

2. Build flexibility in to the scheme
As the business priorities change (or agents get wise to the limitations of the existing schemes!) incentive schemes need to be sufficiently flexible to encourage a modification in agent behaviour where required.  For example, in a certain month the business focus might shift to be more on cash collections at the expense of average handling time and the way agents are incentivised should be modified to reflect this (the balance scorecard helps with this).

3. Ensure schemes are realistic
We’ve seen examples of incentive schemes with ‘entry criteria’ which are either very broad (i.e. more or less everyone qualifies) or overly stringent (very few agents qualify).  Both can be a disincentive.  The trick is calibrating any qualifying criteria over a few months to ensure the schemes are balanced and realistic.

4. Ensure scheme provides a genuine incentive
Top collectors are ambitious and enjoy success.  In our experience good schemes will enable top collectors to earn twice what a poor one earns (but they will collect 3 to 5 times as much).

5. Ensure that the right MI is available
Good management information ensures that performance can be monitored and managed at all levels of the organisation and that agents have full visibility of their performance on a regular basis.

6. Manage poor performers
Consistent poor performance needs addressing through training, coaching or moving them to a more suitable role. Often, those who work in customer services aspire to the incentives and rewards of collectors but find it difficult to make the transition in behaviour required.

And, as a foot-note to this story, you may be interested to hear that my son didn’t get a hat-trick.  He did, however, get a new phone, but only after having helped with some jobs around the house and so, don’t worry, my parental integrity remains (more or less!) intact.

By Charlie Horner, Lead Consultant, TDX Group