Some organisations may be tempted to look for a ‘quick fix’ approach to tracing customers with whom they have lost contact. This is especially the case in the current economic climate where companies are keen to keep overheads to a minimum as they recover from the deepest recession for decades. A trend over recent years has been the development of ‘data cleansing’ solutions. These are often referred to as ‘light touch’ indicators of where an individual customer may currently be living. This approach is often coupled with treating all or the majority of gone-away debt scenarios as ‘trace and collect’. This type of approach might be appropriate in many situations. As Wescot is aware however, businesses may be missing out on valuable opportunities if they rely solely on this type of method. An organisation may find there are considerable advantages to making actual and meaningful contact once customers have been traced.

Rather than taking formal action against the customer once he or she has been re-located, there is a lot to be said for making contact and attempting to resolve the outstanding issue in a sensible way. Responsibility for regulation of the consumer credit niche has now been transferred from the Office of Fair Trading to the Financial Conduct Authority. One of the implications of this is that there is a much greater emphasis on delivering outcomes appropriate to the customer as an individual. Taking a one-size-fits-all approach is no longer acceptable. Rather, companies need to have procedures in place that take into account the personal circumstances of the individual. There is certainly room for high-tech solutions in the tracing and debt collection (especially when it comes to data validation, appropriate data handling and avoiding the type of situation where third parties are repeatedly contacted in error). At the same time however, organisations should also seek out those agencies who appreciate the value of engaging with customers in an effective way.

There is also an important reputational element to this. It is no longer acceptable for organisations to decide on a certain course of action merely because letters and telephones have gone unanswered. Organisations that engage in inappropriate behaviour risk serious damage to their brand image. Wescot is a natural choice as the provider of trace and debt collection solutions for organisations looking for a company with a proven track record in both data validation and treating customers fairly.

In keeping with an increasingly customer-centric approach towards collections taken by the debt recovery industry in the UK, leading agency Wescot has worked to ensure the development of enhanced arrangement management processes. The improved processes will help make certain that reasoning behind defaults is understood and also to enable appropriate action when needed to maintain an affordable repayment plan. The improved arrangement management will help determine what should be done in a given situation, taking into consideration any changes that have occurred in the circumstances of the customer.

A review of Wescot’s collections performance over the 12-month period before September 2013 demonstrated a significant increase in overall collections delivery from prime banking stock across that period. The improvement, in excess of 15%, occurred although the market has been experiencing economic and regulatory pressures that might have been expected to induce a downward trend. The shape of recovery curves is being altered by customer-centric and other practices that have recently come into use in the debt recovery industry. There has been a greater focus on delivery of top-quality customer contacts, alongside investment in improved and ongoing processes of arrangement management. There has also been more of a focus on productive customer engagement and working on delivering repayment plans that are sustainable.

While lower contact conversion rates have been observed, with a coinciding reduction in initial break-in delivery, this has not prevented uplift in collections delivery trends. The uplift can be credited in part to improved stick rates and the benefit built from them in the long run. That in turn provides an explanation for the significant growth in established, paying stock’s value that Wescot has recently observed. The current collections trends indicate the increasing embedded value of recoveries stock. A larger number of truly sustainable repayment plans are being established and managed in the industry, driving that increase in value.

The long-term benefits of positive customer engagement is shown by these recent results, with more appropriate outcomes for lenders and individuals emerging from a compliant collections approach. Debt collection agency investment in analytical capability as well as technology is vital to the success of this approach, as it provides for the optimisation of positive contacts. Further, organisations should invest in agent development so that customer interactions can be of a consistently high quality. A strong long-term collections curve is likely with a sustainable cash flow coming from repayment stock.

Goneaways have become more difficult to identify for debt collection agencies, complicating tracing methods utilised in order to access and interact with customers. It used to be the case that all goneaways could be identified quite easily and treated equally, but major changes in the industry and in housing have made this much more difficult. The industry is facing the challenge of ensuring that organisations avoid repeated, contact with third parties to whom the relevant accounts do not belong. Such incorrect contact has significant consumer impact and this is among the issues Wescot, along with other ethical debt collection agencies, wish to resolve.

One problem facing the industry is the tendency of many organisations to regard trace activity as a mere exercise in data gathering and not as an investment. This attitude has led several organisations to choose cheap and quick approaches to trace and to miss out on the benefits, to the consumer and organisation, of approaching trace with more care and attention. The necessity of finding solutions that enable ethical and effective customer interaction, in particular with no-contact segments, is becoming increasingly pressing within a culture that is more and more customer-centric. It is estimated that 30-40% of no-contact segment populations are ‘hidden’ goneaways and how to approach this issue remains a major concern within the industry.

Simon Armitage, the head of product development at Wescot, has emphasised the vital importance of customer contact. It is clear that investing in the cost associated with a trace or a contact is critical in many cases, but the industry remains challenged by how organisations within it may demonstrate a good return against such investments made. The value of such investments, Armitage says, is in the results’ visibility alongside the organisation’s consequent capability, which is to consider the results in question and apply the most appropriate treatment. Mis-use of third-party data is unlikely when this approach is taken. It is also the case that correct, ethical treatment is made easier, with appropriate ways of dealing with the situation being clearer in such instances. Older tracing formats are evolving alongside the emergence of new trace products to accommodate this responsible approach. The broader market can significantly benefit, alongside organisations in the sector, from a product that delivers live customer contact and not merely data validation in its basic form.