A Debt Collector's Reputation, Deserved or Not?
When it comes to tarnished reputations, in the eyes of the general public, I think that it would be difficult to beat that of the Debt Collection Industry. You could argue, in recent years the Banking Industry has put up a fight for this mantle and the Insurance and Pensions Industry are always in the running.
What makes all these industries similar is finance and the making of money from money.
If we take the debt industry, in a perfect world, there would be no debt; everyone would pay their bills on time and money would flow through the supply chain in a smooth and timely manner. If only this were the case as in reality, bills are not paid, cash flow is restricted, and debt is passed down the supply chain instead of monies.
So I could argue that the debt collections industry helps cash flow and keeps the wheels of industry turning by freeing up money, but I think that this would fall on deaf ears.
The problem lies not with the fashionable, and I think the ageing image of debt collectors as bruising thugs who bash down the doors of the poor and the needy. The problem itself is much more subtle than that.
The service of collecting debt should benefit both the client, the individual or company to whom the debt is owed and the customer, who needs to pay the debt. Although this is, on the whole, the truth, the reality is that the client only avails themselves of the service under duress and begrudges all costs associated with the collection of the debt; that they feel should have been paid without the need for the service in the first place. The customer, on the other hand, does not want to be contacted, to be reminded of their financial failings and have the stigma of debt placed upon them.
The modern face of UK debt collection is one of professionalism, of FCA regulation and of maintaining healthy relationships with clients and their customers.
Clients are helped to recover costs by adding clauses to their terms and conditions, which then encourages using 'third-party physiology' to contact the customer earlier to resolve the debt. Third party debt collection should no longer be seen as a last resort.
A third party also helps by taking the emotion out of debt and hopefully keeps the relationship between clients and their customers.
Debt collectors are now well trained to talk to customers in a caring and understanding way, so as not to alienate and to remind them of their financial failings. The aim is to resolve the problem and to find the best way for the debt to be paid.
As a final argument in defence of this industry, I would like to talk a little of a particular type of need that third party debt collection benefits both the client and the general public involved.
I want now to talk about property service charges.
If you are a Residents Management Company, a Managing Agent or even a Landlord, then statistically, property service charge arrears are the leading causes of disputes between freeholders and leaseholders.
The third party benefit to the client is that most modern terms and conditions allow for recoverable costs for third-party debt collection and therefore allows for the time-consuming task of recovering these debts from being passed on.
The benefit to the general public, the paying leaseholders, is that non-paying service charge leaseholders are contacted earlier, cash flow is protected, and future service charge demands are not affected by recovering not revenues.
So this means that third-party collection benefits everyone involved.
I hope that this blog has gone some way to improve the reputation of the modern debt collection industry. Although this too might fall on deaf ears.
By Kevin Bishop - Senior Partner at Town and Country Legal Services LLP