In Focus Commercial Credit
Left-right: Jan-Michael Lacey; John Preston; Katie Stabler; Leigh Berkley; Myron Fedak >>
If the collector was to turn around and say ‘the computer says no’ then
that is the wrong answer for the customer.
SS: It is the challenge of working with customers. You have to be up front and you have to make sure they can afford whatever they are buying, so if they are buying a £10,000 mountain bike, then you have to do it. So you have the I&E at the front end which you can start to use that to understand them, but it is the challenge of it. So if you are down the line and something happens to the customer which means he cannot afford it, then that is where you struggle. You have to be clear what you are going
to be challenging the customer, say on the fact that they are spending £500 a month on food and it is only them and their wife, then what is the challenge, what does that look like and how are we framing it? I think that people miss that bit and then you do get FOS coming back to you asking why you accepted it and why you were not pushing the customer. The Common Financial Statement will
give you a guide and the ONS data will give you a guide, but they are just guides, so again it comes back to how are you challenging the customer in the right way with your agents being trained to do so.
DJ: Previously to Glenhawk, I worked for a consumer-finance business where it was common practice to compare the original I&E with the new I&E when the account gets into collections. It is crucial to review what the original I&E is telling you, and then we could match the two, allowing us to pin point where the break down is. In my experience, doing this gives a
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comprehensive understanding of the type of customer you are dealing with, where, if necessary, you can challenge as required. I do not think it is a question of whether you should or should not compare the two; I think it is imperative to review both. In my opinion it is the only way to understand the customer and their circumstances as to how they got to this stage of collections.
RB:We would always refresh the data at the back-end whenever there is a decision to be taken – where are you going to send it, whether it is going to a DCA or going legal, any such decision. Why not use your own data? You would be crazy not to.
IR:More and more people are using ONS data anyway, so using your own data can be the first time you really have something to validate E&I figures.
SW: There are so many lenders represented around this table and it is extremely interesting that despite us all doing the same
thing on the face of it, elements that some of us rely on can be irrelevant for another. In particular the use of more external data versus better analysis of your own data in terms of creditworthiness and affordability assessments. Because no specific procedures are given for
how to properly and proportionately assess potential customers, we can have this debate about what is more useful.
Would you share your I&Es with other companies and could you see an organised system of sharing being in place in the next couple of years? SS: If you look at the CRAs, I doubt that anyone will use all three for a lending decision because it is just too expensive, but if you take one CRA, in a particular section of the portfolio their information might be very thin. So the customer does their bit at the front
and you want to add to that from the CRA but you can only see a certain number of accounts, so how can you validate what the customer is telling you? So it is not just what you are taking at
They do not cope particularly well with people with variable incomes and zero-hour contracts. That is a fundamental flaw and I am certainly not saying that you should not do them, but that is a problem in trying to determine affordability because it will vary for that customer month on month
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the front-end as your own data or what ONS thinks people spend, but if you are using two CRAs then the third could have a lot of information on a certain group of customers, which if course you may not be using.
IR: That can be a problem with an I&E, it is very much a snapshot in time. They do not cope particularly well with people with variable incomes and zero-hour contracts. That is a fundamental flaw and I am
certainly not saying that you should not do them, but that is a problem in trying to determine affordability because it will
June 2019
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