First of all, in my view, the following applies to every country: Do not be passive when customers do not pay! An important factor for an efficient payment process is always a well-functioning system of receivables management – from the first friendly reminder to collection in court. This requires good structure and certain routines, especially in international debt collection. But that is not all! In some regions, unconventional procedures are also necessary – of course always within the framework of the applicable regulations and laws! And both the UK and Ireland, as well as the USA, are strictly regulated markets with a strong focus on consumer protection.
UK – Sure instinct is key
In the United Kingdom, the debt collection business is regulated by the Financial Conduct Authority (FCA), which oversees the conduct of firms that provide financial products and services to customers. In addition to knowledge of local rules and laws, debt collection also requires an extremely high degree of tact and sensitivity, as vulnerability is the central issue in the UK. The point here is that companies are obliged to treat customers fairly with due consideration for the customer’s individual circumstances.
The key feature of UK collections is to focus on making it easy for the customer to engage. A dogged approach that repeats the same thing over and over again, or appears to threaten, will not succeed and is more likely to force a customer underground. From my personal experience, fairness and sustainable arrangements will always deliver greater, longer-term success – also from an international perspective.
This also applies for the field service, which is still quite common in the UK. Here, too, it is a matter of acting in a friendly and cooperative manner. Nonetheless, field service employees are occasionally faced with challenging situations, for instance when encountering guard dogs. In order to protect all those involved, in some cases dog handlers are taken on by the field service. These ensure that such situations do not escalate and that, ideally, a solution-oriented conversation can take place.
The great importance of consumer protection was underlined by the almost 100-page Vulnerability Guide*, which was compiled in 2017 on the basis of research findings from the University of Bristol. The recently published CAP** Client Report reveals current insights on debt, for example the dramatic effects such as the need to sacrifice meals (26% at least once a week), social isolation (71%) and negatively affected health (72%). Alarming results, which underline the importance of proper consultancy and a vulnerability approach in debt collection.
Ireland – Whoever searches finds
Ireland is a very small market that behaves similar to the UK. Both countries are commission markets like the USA, i.e. debt collection fees may not be added to the customer’s account. Payment is usually made by the client as a percentage of the amount collected, which doesn’t often reflect the regulatory drive to ensure the best outcome for the customer.
However, in the past, reaching Irish customers was very dependent on the knowledge of the postal workers or the neighbourhood, as there were no proper streets or postcodes. However, the introduction of area codes has significantly improved transparency and collection processes can now be set up and carried out more efficiently.
USA – Exercise caution with the use of mobile phones and email
In the New World, too, regulation is very important. The Federal Government has, for example, created a comprehensive set of rules in the form of the Fair Debt Collection Practices Act (FDCPA). This is supplemented by specific rules and laws in the individual states. This poses particular challenges for international debt collection – especially for companies that are not headquartered in the USA. It therefore makes perfect sense to rely on debt collection service providers that are always up to date. After all, debt collection companies have to take state-specific examinations at regular intervals to ensure that their license is renewed.
In general, I have noticed that in the “land of unlimited possibilities”, the possibilities for debtor communication are clearly limited. The current debt collection ordinance is actually a bit outdated and no longer regulates many matters in the way that the current reality of consumers’ lives requires. For example, customers may not be called on mobile phones by an agency using an auto-dialer. Consequently, debt collection agencies must manually dial mobile phones, which takes two to three times as long. US consumers also have protections in the law that they may not be contacted by email unless they have provided written permission to do so. However, these regulations are being reviewed and hopefully will be amended or updated to meet the way consumers communicate currently.
Creative for your success: from dog handlers to innovative platforms
No matter whether dogs pose a danger or not, addresses are easier or harder to identify or the regulations on telephone contacts are tightened or relaxed – in international debt collection, you are never immune to changes and surprises. Here it is necessary to adapt, keep an eye on all guidelines and occasionally even develop creative counter-strategies, such as the use of dog handlers.
But as Henry Ford once said: “Success consists of having exactly the skills that are in demand at the moment!” We work on this every day at Arvato Financial Solutions. Our proven processes and the country-specific expertise of our branches and partners form the basis for our international debt collection and international receivables purchasing services. Beyond that, it is important to me personally that we combine our many years of expertise in financial services, analysis and technology to develop innovative and automated solutions for international debt collection. These simplify complexity and help our clients to successfully implement their international growth initiatives. If you would like to grow with us, please contact us here or get in touch with your UK contact.
* Vulnerability: a guide for debt collection – 21 questions, 21 steps
** Christians Against Poverty (CAP): A nationally recognized charity that works to help the most vulnerable out of poverty across the UK