Policy, process and procedure - the science of collections

A cultural shift in arrears management behaviour is required if customers are to be treated fairly and a more defined management information provision will be required by lenders.

As the economic roller coaster continues, the focus must be on better understanding the full extent of financial issues faced by borrowers.  Under the Treating Customers Fairly (TCF) principles, collections departments are required not only to develop a better understanding of individual customer circumstances by building up a 360 degree view of each customers situation, but will also need to prove to the regulators that this practice is being adhered to.  Failure to comply with such regulation has already, and will continue to result in hefty fines for those lenders caught on the wrong side of the law.

A highly flexible and configurable, automated collections software solution can help lenders to work towards compliance by focusing on a number of key areas.

The key factor in remaining compliant lies in:

1. Fully understanding the customer's individual circumstances

2. Making sure customers understand the options that are available to them

3. Ensuring that all customer details and arrangements are accurately recorded.

Consistency of business process, strong controls and a comprehensive audit capability can really pay dividends here.

It takes a skilled collector to truly understand the root cause of a customer's difficulties with arrears, but an intelligent collections system will enable collectors to quickly undertake an income and expenditure analysis and establish the prospects for them in the short to medium term.

An intelligent collections system should not only facilitate the capture of customer data during this exercise but should also apply business rules to the data to ensure that any appropriate triggers are highlighted.  For example, when a customer's spend in a certain area is considered high, an appropriate automated trigger can prompt further investigation.

Despite the fact that an income and expenditure analysis is best practice and is essential for a collector to truly understand the unique circumstances of each case, a customer cannot be forced into completing the exercise.  This can result in the customer not receiving the solution they had hoped for or indeed the one best suited to their needs. However, an intuitive and automated collections system can help overcome customer reluctance to divulge additional information around income and expenditure by providing the flexible scripting capability needed for further investigation by the collector. In conjunction with good telephony capability, it can also provide the evidence that the collector did all they could to gather the information required for a full assessment but could not overcome a customer's objections. This in turn feeds into excellent foundations for organisations to develop resilient case review processes that can ensure not only compliant behavior, but also excellent levels of customer service.

In addition to enabling collectors to work within well-defined business parameters, a collections system should also be intuitive enough to ensure that any fees and charges are applied or suppressed correctly.  For example, the suppression of arrears fees, once a live arrangement to pay is in place, would reflect well on the lender as it adheres to the Treating Customer Fairly Principles.

The provision of regulatory Management Intelligence is more challenging to deliver.  It's not just about churning out the figures though they will play a vital part in providing regulatory MI, it needs to be supplemented by good quality commentary and proof of remedial measures if applicable.  A good system can contribute a lot to this but it will need some work and analysis to deliver on the expectations of regulators.

In summary, as regulatory reform of the financial services sector continues to gather pace, with the nature of many guidelines becoming ever more subjective, the primary arrears focus must be around the three P's policy, process and procedure. The benefits of an automated collections system in supporting this focus and proving compliance should not be under estimated.

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