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The Credit Services Association (CSA)
Blog: Debt collection innovation – where do we need to be in 10 years?
Peter Wallwork is Chief Executive of the Credit Services Association.
As we start a New Year, the obvious thing to do would be to reflect on the past year in the debt collection industry, and look ahead to what we expect to see and be doing this year, 2018. But this time around, I want to go bigger picture than that.
John Ricketts, CSA President, was talking at the Household Credit Conference in November last year and was asked the question: “Where do you think the debt collection industry will be in 10 years’ time?” His answer was that it will be almost unrecognisable with technological innovations and artificial intelligence replacing call centres, freeing up time for quality customer engagement with those that need it. When I was recently asked how we as an industry would rise to this challenge, I pointed out that over the last number of years the debt collection sector has built up a fantastic track record of innovation through understanding the different needs of their customers and embracing technology to reflect that.
Debt collection in 2007
To set this into context, let’s take a look at where we were 10 years ago. 2007 will always be remembered for the beginning of the biggest global financial crisis in a generation. It’s after effects are still being felt a decade on.
Back in 2007, the Credit Services Association was already working hard to raise best practice standards in the industry. Our Code of Practice first introduced in 1985, was used as the basis for the Office of Fair Trading’s own Debt Collection Guidance, which was updated in 2006 and 2011 with full support and guidance from CSA. However, debt collection practices did look very different 10 years ago in comparison to today.
Financial Conduct Authority (FCA) authorisation
That change in collection practices was largely accelerated when consumer credit was brought under FCA regulation in April 2014 (probably our industry’s biggest change to date) and our newly updated, much more rigorous Code is still very closely aligned to the FCA’s CONC 7 rules. And it is partly down to the fact that there is widespread recognition of the ethical and commercial case for measuring success according to customer outcomes rather than amount collected and time spent collecting it.
We strongly believe the CSA Code of Practice is still the only ‘common denominator’ across all types of regulated and unregulated debt collection. We are still campaigning hard to encourage regulators in sectors outside of financial services such as utilities and telecoms to fully adopt our Code for the benefit of consumers to ensure consistency and best practice, (Ofwat encourages water suppliers to only use CSA Members for debt collection) but we have a come a long way.
With the help of the CSA, our members can be prepared for game-changing legislation like General Data Protection Regulation (GDPR) and regulatory changes like the Senior Managers and Certification Scheme, whilst at the same time, embracing new technologies for increased efficiency and improved customer outcomes.
Addressing vulnerability and embracing digital
As our business practices have changed, margins have been squeezed however technology has still advanced and been embraced. Speech analytics, omni-channel solutions, payment portals and Interactive Voice Response (IVR) systems were innovations focused on giving the customer a choice on how to engage, while other technological advances created efficiencies and a saving in operating expenses as a result. Ten years ago, most debt collection agencies operated large call centres, and many still do but the focus is starting to shift towards more digital interaction. The focus in recent years has very much been on improving the quality, ease and availability of interaction that we have with customers, particularly those who are in financial difficulty or are assessed as vulnerable in some way, such as those with mental health issues. While interaction with vulnerable people has resulted in an increase in the use of ‘human time’, this is where resources saved elsewhere will continue to need to be deployed and this is unlikely to change – that said, something that hasn’t changed much in the last 10 years is the perceived taboo around talking about personal finances… and those better able to deal with matters themselves are taking advantage of the digital offerings which allow them to do so at their own convenience and via their chosen channel.
We have recently introduced a new Supplier Membership which we hope will give CSA members better access to fintech providers who will help them transform their business practices.
The debt collection sector is now working much more collaboratively than it was 10 years ago, with a wider group of stakeholders including Government, regulators, creditors and the debt advice sector, the latter being formerly (and still sometimes!) our biggest critics. This is largely down to the engagement and lobbying work done by the Credit Services Association to open up lines of communication and demonstrate the need to work together. There have been certain areas in which we have managed to influence the course of regulation that would have been unintentionally detrimental to both customers and members due to a lack of understanding about what the impact would be on collections activity.
Overcoming reputational issues
However, we still face a huge reputational challenge, which in 2018 is largely an unfair reflection of our industry and how most within it, particularly those that are FCA authorised but also those working in non-FCA regulated sectors, actually operate. In many ways, we are leading the way on treating customers fairly, with others, for example, Local Authorities under the spotlight for poor collections practice. This sector is now looking to our members like 1st Credit (who have created a joint venture with Hammersmith & Fulham Council to offer ethical debt collection services to Local Authorities across the UK) for a best practice model. This would certainly have been unheard of 10 years ago and shows how far we have come.
We have some big hurdles to overcome over the next 10 years, not least in changing the minds of those members of the public who, unlike those who have financial difficulties, will never actually interact with and experience the changes that the industry has made, but who perpetuate the popular myths of old. If that weren’t enough, our biggest task is overcoming the barriers that stop those consumers who need our help, responding to our attempts to make contact – many of whom believing the nay-sayers and putting themselves in a worse position as a result. Commentators on social media, one of which I read again in the last few days, calling the debt collection industry a group of people who thrive on other’s misery, recommending anyone in debt to avoid contact at all costs is no help to anyone…
The first and most important step to making progress, particularly with those who’ve never actually experienced our work first hand, is to demonstrate our positive impact on society as a professional, credible industry that inputs back into the economy and supports those in financial difficulty to find a resolution, whether they are able to pay or not.
Lack of awareness and understanding about how far we have come and how we now operate will only continue to hold us back and I am committed in my role as Chief Executive of the CSA, to educating wider stakeholders and the general public, and championing the good work of our members. But we can’t do it alone. We need other key influencers (like Local Authorities, advice agencies, and high street banks who have strong brand recognition) to support and work collaboratively with us. At the moment, there are far too many well-meaning initiatives operating almost in isolation and we must work together, building on strengths and eradicating bad-practice, wherever it may lay.
Workforce planning for the future
Finally, if we are going to undergo such transformational change in the way we operate as an industry, we need the right people to help make it happen. Despite becoming increasingly digital, debt collection will always be a ‘people’ business and we need people with the right combination of emotional intelligence (even if we employ more artificial intelligence), commercial awareness, and regulatory knowledge to be the debt collection workforce of the future. We’re encouraging our members to think more proactively about talent attraction and filling skills gaps, offering professional qualifications and apprenticeships tailored to key roles, and demonstrating clear career pathways. Attracting people into the industry remains a challenge but once we do, we must retain the best with rewarding careers and ongoing professional development to continue raising standards.
The Apprenticeship Levy is a huge opportunity and we are working with our Levy-paying members and other employers (who all have credit control departments) to understand how they can put it to best use to train the next generation of debt collection sector leaders.
The future of our industry is an exciting one and we as the trade association plan to do everything we can to ensure that it is an attractive one to work in.