Credit Management issue April 2021

PANEL BASHERS
Performance Indicators
Karen Savage and Paula Swain answer
this month's question.
How should
I assess the
effectiveness
of a third-party
collection
agency or
lawyer?
Panellist
Karen Savage FCICM
PERHAPS the best way of
answering this question is
to look at our own model
and the lessons that can be
learned from it in terms of
how ‘effective’ a third-party
can and should be.
We have a panel of six DCAs and three
law firms. Managing their performance
requires a robust Supplier Assurance
Framework. The Assurance Framework
seeks oversight and assurance over
each servicer firms’ general governance
and control framework, adherence to
regulatory requirements, customer
treatment and evidence of satisfactory
recruitment, training and competency
frameworks. Ongoing Quality Assurance
checking are also conducted on a regular
basis.
Azzurro Associates has an independent
second line Risk & Compliance Team. The
Head of Risk & Compliance is responsible
for the compliance monitoring plan,
complaints handling and the monthly
QA framework over our suppliers. Each
customer-facing supplier goes through a
Due Diligence process, an annual review
of policies and a monthly oversight
process. The monthly oversight includes
anything up to 50 customer telephone
calls and file reviews per supplier. These
are marked against industry best practice,
regulatory requirements and our own suite
of policies. (Once lockdown restrictions
in the UK have been lifted, the Risk &
Compliance Team will recommence visits
to each supplier to conduct a full audit.)
Over the last 12 months, weekly virtual
meetings with suppliers have been ‘the
norm’, to discuss and assess collections
performance, accounts that are on ‘hold’
as a result of COVID, and or agreed strategy
as regards litigation and use of the courts.
Both the FCA and the CSA provided regular
updates on generic operational issues and
best practice, which were also used as a
benchmark for third-party performance.
What we looked for (and still look for) in
particular includes:
• The ability to provide timely, accurate
reporting in line with our monthly
reporting requirements. All transactions
(whether cash or non-cash) should be
coded correctly enabling straightforward
balance reconciliation. Periodic audit of
the data transmission should highlight few
if any errors.
• A review of a sample of accounts placed
with the servicer should indicate multiple
attempts to contact the customer through
the various channels available to the
servicer (phone, letter, email, SMS etc).
Further contact with the customer should
reflect the preferred communication
channel agreed with that customer.
• The servicer should proactively suggest
changes in strategy based on information
gleaned by the Contact Centre. The
recommendations should highlight the
cost/benefit of such a strategy change.
• The servicer should, where possible,
enable the customer to use self-serve
processes to manage their debt position.
Such online tools should offer a suite of
payment plan and settlement options,
ensuring all forbearance tools and
affordability guidelines are adhered to.
• Running a benchmark strategy
introduces an element of competition
to the servicing strategy between two or
more service providers. The key criteria
to ensure an effective benchmark process
are:
The debt placed is randomly allocated –
with a check of credit quality characteristics
to ensure no pool is substantially different;
The timeframe of measurement
must discourage an acceleration of the
collection process by the Servicers, and
thus create artificial unsustainable results;
The benchmark pools must be of
sufficient size to support consistent efforts
by the servicers;
One should consider a hybrid activity
and contingent commission rate model,
to ensure each servicer is appropriately
compensated for their efforts, thus
ensuring a level playing field.
Close oversight during the Pandemic
– and beyond – should ensure collection
volumes remain stable, whatever the
challenge!
KAREN SAVAGE FCICM
Chief Operating Officer and Solicitor at Azzurro Associates.
Advancing the credit profession / www.cicm.com / April 2021 / PAGE 32