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The Analysis News & Opinions


Creditors must decide on key collections staffing questions


Credit and collections organisations will need to make difficult decisions in terms of their collections capacity, ahead of presumed changes in the national economy, according to a senior industry professional. Speaking at a virtual round-table debate


run by CCRMagazine, Jaime Nuwar- Graham, customer services – director of planning at Lloyds Banking Group, said: “We are all trying to look into a crystal ball which none of us really know about. “If you look at the Lloyds forecast – and


I think we are in line with HSBC – we are predicting arrears volumes to double by the end of next year in both secured and unsecured lending, which is certainly rather dramatic. “It is pretty high compared to what we


forecast for, but you have to look back and ask what precedent we have to judge these things on. “The precedent we could look at might


be 2008 to 2010, and they are very different circumstances, but, clearly one of the big drivers in unemployment. “One of the things that has surprise me –


because people took a scare factor at arrears doubling – is that if you look to see how fast unemployment spiked in 2008, it actually rose a lot higher and a lot faster than I remembered that it did; and arrears entries pretty much went up in line with that. So there seems to be a very direct and proportional link there.” He continued: “The other – very different


– perspective is when we look at differences in variable rate on mortgages, we can model and say ‘if we put 50 basis points on the variable rate, this will put the average payment up by x hundred pounds, and how many people do we think this will tip over the limit’ it hardly moved the dial on arrears entry. “So on the one hand there is a clear link


between unemployment and entries, but also – at least as of two years ago – there was a little bit of buffer zone for home owners. “So, as things stand, the predictions we had for quarter four, we are actually


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running way below, but I think that is the impact of payment holidays and various factors not having hit year. “We are looking at how fast and how


dramatic it will be, which then drives the operational response. Because one of the biggest challenges, I imagine for all of us, is route to competence in collections. “You do not put an advert out there and


have a trained employee ready to go in two weeks, it can be 10 to 16 weeks, so we need to be at a position where we say ‘arrears volumes may fly up in October or November, so we need to start recruitment now, but they might not go up, so do we want to put cost into the business when the need might not materialize?’ “It might not be applicable to everyone,


but one thing that we have been able to do is realise that we have under-utilised staff in the branch network, so can we train up people to support our work. “So that might not be a long-term piece,


but equally, if we do need more collectors, where are we going to find them? Where are we going to put them? “This has, of course, encouraged us to


look again at how we deal with issues like self-serve to see if we can persuade customers to self-serve rather than us needing to do a 30-minute I&E. “So we have tried to look at this, not only


from an operational point of view – which we certainly need to do – but also from a strategy and policy perspective, how can we streamline and simplify things without compromising the conduct position.” Meanwhile, Andrew Jackson, managing


director of Swishfund, added: “The situation that we are in, and the uncertainty of it, has changed the way that collections activity should be done. “You cannot charge late fees during


Covid – which were a great tool, since you could waive them after two weeks once the customer is back on track. We are not even suggesting late fees at the moment! “If the customer asks for a payment plan, we know the reasons already; and there is no


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point asking for a cashflow forecast because nobody has any idea what their cash position might be in two months’ time, let alone six or more. A lot of the things that we used to base our decision-making on are no longer relevant. “This is similar at the front-end. Many alternative financial


institutions based


their lending decisions on algorithms, for super-fast decisioning. When Covid first hit in March, these same tech-driven finance companies were scrabbling around trying to find underwriters. They needed people who could really understand a business, rather than a machine that had no Covid-data to learn from, and no imagination. “As with collections: you cannot use the old


tools in the new world, and technology looks old in the face of extremely fast-changing economic uncertainty. “Further, given the more empathetic and


sympathetic culture that we now find ourselves in, relationship-collections brings value that is invisible to numbers-based treatment strategies. It is all about creating new partnerships with our existing SME customers; understanding their Covid journeys and how the future looks for them. “This will always get you a much better


result than if you are just write off 40% of your portfolio because that is what a mis-guided machine says will happen.”


January 2021


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