Compliance is still clearly a huge concern for DCAs
Voluntary Code is too open to interpretation to be followed closely
Compliance with the industry Lending Code1 is one of the main challenges that debt collection agencies (DCAs) face, say a group of debt collection agency senior executives who recently met at a top level roundtable event organised by Sopra Group.
The Voluntary Code, which sets standards for financial institutions to follow when dealing with loans and credit aimed at personal and small business customers, often appears vague and subjective and DCAs struggle to follow its recommendations. Another concern is that while some banks and building societies favour a tight interpretation of the rules, so that they are seen to be in the lead on best practice, others are more relaxed and favour a looser interpretation.
The group of ten Chief Operating Officers, Chief Executives, Directors and Heads of Compliance felt that the Code could be re-drafted more tightly to detail exactly what outcomes DCAs should be aiming to achieve and to give practical examples to demonstrate these outcomes. For example, the Code contains a commitment to “act sympathetically and positively” when considering financial difficulties, but DCAs often disagree over what that actually means in practice.
One Head of Compliance commented:
“I don’t think that you could ever say that you are totally on top of it. If you ever got to that stage ... there will always be something around the corner. I think that we would all find a speed reading course useful at the moment because the number of things that cross our desks that you have to know and understand is becoming ever more significant.
Another Head of Legal agreed:
“We have the same problem …. in interpreting the rules and working with a number of companies - each [of ] which interprets them in different ways. We’ve found that we need to get groups together to try and understand things and implement solutions.
“We’ve also tried to have some direct conversations with the regulators to try and get some arbitration ... the interpretation of the Code is a major issue. When you buy debt from many different banks, they each have their own interpretation of it. For example, if you have problems with several departments interpreting things differently, then you could try to go to the regulator, but [even then] they won’t talk to you if you’re not a [Code] signatory.”
The Lending Code is frequently used by debt counselling services when negotiating with DCAs on behalf of their clients or by debtors themselves who want to make a complaint about harassment or inappropriate behaviour.
As well as issues with the Lending Code, the panellists also highlighted two other key trends:
The debt collection industry as a whole needs to be a lot better at educating consumers about how the industry works, so that it can directly help those who are most vulnerable . Consumers are often given misleading information by consumer forums or other third parties which may in the long run make things more difficult for them. However, the perception of DCAs as « the bad guy » is a difficult one to overcome and will need a lot of work.
Secondly, Debt Collection Agencies need to operate a strict adherence to self-regulation and fair outcomes or they simply won't last very long in the industry. DCAs which routinely flout the rules and do not act responsibly will come to the attention of the regulators and have their licences to operate revoked.
Elliot Howard, Director of Software Solutions for Sopra Group UK commented:
“Compliance is still clearly a huge concern for DCAs as heavier and continually evolving oversight has placed a significant and increasing burden on the industry. Sopra Group’s Debt Collections Suite has been developed in collaboration with leading industry practitioners and is well placed to help as it enables a tailored, customer-by-customer approach to debt cases. It gives a total view of your arrears management operation across all products and customers. You also have the flexibility to adapt to the changing circumstances in the market, as well as those of your business and your customers, minimising the risk of both agency and debt purchase business.”
A full report on Sopra Group’s Debt Collection Summit 2013 will be available from the Sopra Group website from early April. To obtain your free copy, please register here: http://www.sopragroup.co.uk/debtcollectionsummit2013/
About Sopra Group
A leader in the European consulting, IT services and software development markets, Sopra Group generated revenue of 1.050 billion euros in 2011 and employs over 13,000 people. Thanks to a longstanding culture of excellence and strong sector-specific, functional and technological know-how, the Group offers its clients an end to end approach based on a well-honed business model. Sopra Group’s ambition is to allow its clients to successfully execute transformation projects that will give them a competitive edge and help them drive growth. Sopra Group’s savoir-faire encompasses prior strategic reflection through to the supervision and implementation of major IT and software programmes. For more information, please visit our website www.sopragroup.com.
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Carina Birt, Sarum PR
PR for Sopra
+44 1722 322916
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