Today sees more reports of payday lenders failing their customers. The FCA said it had found “serious non-compliance and unfair practices” in all firms that it had reviewed since taking over regulation of the sector in April 2014. Examples include backlogs of letters and documentation from customers including those in vulnerable circumstances; failure to give customers “breathing space” when they are in discussions with money advice organisations; and unsustainable treatment plans.
Should we be surprised at this? My answer is “no”. Payday lenders are a relatively new phenomenon in the financial services sector who enjoyed huge profit and consequently focussed on lending and marketing. Collections took a back seat and is taking time to catch up.
In our reviews of organisations in many industries we see similar traits. Even in well established companies of many years tenure in their industry, a lack of investment in Collections is a common occurrence. Collections is often seen as a necessary evil and lacks investment behind the more high profile areas of fraud prevention, sales and marketing. The Collections department is seen as a “backwater” where nobody who has ever been in Collections before, wants to work. That is if the organisation actually has a Collections department and doesn’t rely on other departments handling collections calls.
This lack of investment and attention results in a lack of expertise and focus which will ultimately negatively impact the bottom line as well as customer experience. Cottage industries and spreadsheet worklists spring up to handle what should be straightforward processes. The “this is the way we’ve always done it” mantra is loud and fresh talent cannot be recruited because a) there is no appetite to do so and b) fresh talent realises they would be fighting a losing battle and go elsewhere.
Often, organisations jump on a new collections system or analytics without realising that those tools, on their own, will not bring about a revolution and that all aspects of the collections operation need to be “optimised” across all areas of technology, strategy, operational delivery, organisation and performance management.
The FCA regulates financial services but we have already seen its influence in other industries (internal debt collection agencies withdrawn across most industry sectors) and in my view FCA guidelines, pillars and principles are already being used as the yardstick by other industry sector’s regulators – and just as importantly are being expected by customers and consumer advocate bodies.
In organisations where collections is a core competence the Collections department is seen as one of the most important functions in the business, with the profile to go with it. This is not just because of the potential negative impacts of getting it wrong but also because of the substantial returns possible in terms of reduced costs/bad debt charges.
Now is the time to take a long hard look at your collections infrastructure and ask yourself – are you giving collections enough attention?