John Ricketts, Vice President of the Credit Services Association (CSA), says that the industry should be looking to learn from the concept of ‘marginal gains’.
Sir Dave Brailsford CBE, the former director of British Cycling, was among the first to coin the phrase ‘the aggregation of marginal gains’ to describe his approach to developing performance. Put simply, it is the notion of how small improvements in a number of different aspects of what we do can have a huge impact to the overall improvement of a team or business. It might also be applied to our own industry as it looks to tackle key challenges around consolidation, Treating Customers Fairly (TCF),
and managing complaints.
Debt buyers, the ‘stars’ of the credit services industry in many ways, have enjoyed considerable success in recent times. They have been perhaps more remarkable – in the true sense of the word – in expanding their businesses and acquiring portfolios that have seen the debt sale and purchase sector within our industry rise to prominence.
But for the first time since the Credit Services Association’s Data Gathering Initiative (DGI) reported in 2012, Debt owned by debt buyers has seen a sudden and marked drop. Having previously recorded steady and regular quarter on quarter growth, in Q2 2015 debt owned stood at £52.3 billion against £56.4 billion in Q1 2015, a drop of some £4.2bn (or seven percent). This returns debt owned back to a level last seen in Q1 2014.
There may be several reasons for this: it could imply that whilst some debt buyers are clearly growing, as a sector debt buyer collections and debt written off are outstripping purchases for the first time. Whilst the fall is considerable, there is certainly no cause for alarm: when put into context this figure still represents a 16 percent increase over the same period in Q2 2013 when debt owned stood at £45.1 billion.
While the figures for debt owned have fallen, so too have the figures for debt held by Debt Collection Agencies (DCA’s) for collection, though at a much slower pace than we have seen over the last three quarters. The statistics suggest that DCA placements have found their new level following an extended period of pressure on market share.
In Q2 2015, placements to DCA's were £26.5 billion, down only one percent on Q1 2015 at £26.8 billion. However, this number was supported by an increase in debt outsourced by the debt buyers to DCA's that has risen by three percent (or £454 million) over last quarter. Starkly, DCA's have seen 29 percent of their market share of debt held for collection disappear since Q2 2013 (nine percent in the last year).
As a result of the drop in debt held by the debt buyers, overall (once we net off the debt outsourced to DCA's by the debt buyers so as not to double count) debt held for collection by CSA members has fallen from £69.4 billion in Q1 2015 to £64.3 billion in Q2 2015 - a drop of some seven percent.
So much for the money held, but what about the volumes and values of debt collected? Collections by DCA's have continued to hold firm after two prior quarters of successive growth, once again demonstrating the resilience of DCA's against a backdrop of reducing placements (albeit at a much slowed pace), the withdrawal of paying accounts, panel consolidation and the challenges of working in a newly regulated environment. Collections for Q2 2015 were £469 million compared to £471 million in Q1 2015 and still reflecting of level of collections last seen in 2013.
In-house collections by debt buyers are performing especially well; they currently stand at £306 million for Q2 2015 compared to £260 million in Q1 2015. This continues the growth seen in Q1 2015 and represents an 18 percent growth over the last quarter, a 38 percent growth over the same period last year, and an amazing 59 percent growth over the same period two years ago, demonstrating how far the debt purchase industry has grown in recent years.
Interestingly, whilst the number of revenue generating collections staff has remained relatively flat for another quarter (at 6,039 agents compared to 6,078 in Q1 2015), the DGI is showing another spike in non-revenue generating back office/compliance staff (up from 4,880 in Q1 2015 to 5,203 in Q2 2015). This seven percent growth of 323 takes the back office/compliance staffing figure to its highest ever percentage level of total staffing (at 46 percent) and the highest level since DGI records began. This is an enormous 15 percent increase over Q2 2013. Correspondingly, revenue generating collection agents have fallen by nine percent over the same two-year period, down from 6,623 to 6,039.
The number of upheld complaints has again grown, albeit modestly - up three percent at 3,468 in Q2 2015 compared to 3,351 in Q1 2015. This is an increase of 21 percent over the same period last year in Q2 2014 when upheld complaints stood at 2,856 and a 50 percent increase over the same period two years ago in Q2 2013 when upheld complaints were 2,312.
Whilst some may take a sharp intake of breath at these stats, it is worth noting that the industry is now being measured against a new standard, and CSA members have become better at identifying, recognising and recording when a customer has not been treated as well as they should. Agencies have undoubtedly ‘upped their game’ in this area, evidenced by the investment in rising numbers of back office and compliance staff. As an industry, we continue to generate a mere fraction of complaints as a proportion of the number of cases we handle, so any rise should be seen in this context as well as an indication of our willingness to learn, develop and benefit from the resulting marginal gains. After all, if you never recognise a mistake, you never make a discovery.