Credit Management Jan:Feb 2018

OPINION
Collective Action
Why is the lack of a single regulator for the whole
of the collections industry adversely impacting the
commercial collections space?
AUTHOR – Sean Feast
AT the UK Credit and Collections
Conference in 2016, John
Ricketts, President of the
Credit Services Association
(CSA), surprised the BBC’s
John Humphrys with news
that the debt collection industry does not
have a single regulator. In very simple terms,
consumer debt collection agencies collecting
financial services debt are regulated by the
Financial Conduct Authority and require to be
FCA authorised; collections activity outside of
the consumer world, however, is somewhat in
‘no-man’s land’, with no single ‘authority’ to
which it can nail its colours.
This unsatisfactory state of affairs is
exercising the minds of a great many, not
least those operating in the commercial
collections world. It is also, in the opinion of
some, allowing rogue operators to become
established, tarnishing the good name of
those who work earnestly to return monies to
the business economy.
Lynne Quigley-Darcey, Managing Director
of Darcey Quigley & Co is one who believes
that the disappearance of the Office of
Fair Trading (OFT), which used to have
responsibility for every facet of debt
collection, has done the industry a gross
disservice: “The departure of the OFT has
left a vacuum, and I’m concerned that this
vacuum is being filled by companies looking
to exploit the loopholes for financial gain at
the expense of their clients.
“We see companies being formed with
professional sales collateral and very
informative websites, but it’s all a charade.
We have even recently been appointed by
clients to pursue other DCAs for money that
has been collected but not passed on. Certain
unscrupulous firms are, in effect, stealing
their clients’ money, and we have had to
litigate to get it back.”
One such firm exposed by a national
newspaper was Corporate Litigation Services
whose website, strangely, features an
impressive image of Canary Wharf, even
though the business is based in Nottingham.
Another is Harper Cross Associates in
Newcastle. Harper Cross recovered £8,000
owed to a building supplies firm, but denied
they had received the money and failed to
forward the cash on to the client.
“The problem seems to be that there is no
measure of what is ‘professional’ or ‘rogue’,
and no way for potential clients to differentiate
between the two,” Lynne adds. “It seems that
almost anyone can set up in business as a
commercial debt recovery agency, collect a
client’s money, use it to pay themselves, their
own staff and then go bust and start up all
over again, and there is nothing anyone can
do about it.”
Stephen Lewis, Managing Director of LPL,
agrees, though he despairs at the gullibility
of some SMEs, especially when it comes to
the promises made by agencies that they
can recover money from firms already in
liquidation – for a fee on account: “This is very
annoying and difficult to control because it is
borderline lying,” he says.
Steve says there are similarly scary stories
out there of the irresponsibility of some
companies as to who they extend credit to. He
also says, however, that it is not always easy
for the smaller firms to predict the good risks
from the bad (think Monarch, BHS, Carillion
etc – and recently, the collapse of Multiyork),
or how big-named firms can enforce payment
embargoes as part of their usual trading and
credit frameworks: “This is far more worrying
for the commercial sector than the few bandit
debt collectors,” Steve suggests.
Lynne says that there could be simple
measures that are easy to audit, such as
having a ring-fenced, dedicated client account
separate from the daily business account. She
points to other industry bodies such as the
Law Society of Scotland, which is very heavily
regulated, and where separate client accounts
are mandatory. A Client Protection Fund,
she says, should be the absolute minimum,
as well as having a good credit rating and a
proven track record.
Another option is to apply for FCA
authorisation, even though it is not required
for commercial debt recovery organisations,
nor does the FCA hold any sway or jurisdiction
over their actions. Darcey Quigley believes
that FCA approval is the way forward and is
currently going through that process along
with ISO 27001 & ISO 9001.
“We believe that debt recovery should be
an extension of any credit control department
and that client should always have complete
honesty, transparency and professionalism,”
she adds.
“When tendering for contracts, we are
frequently asked whether we are FCA
authorised, even though it is irrelevant/
The Recognised Standard / www.cicm.com / January-February 2018 / PAGE 42