A summary of the roundtable discussion on how the use of digital communications can improve the compliance, efficiency and effectiveness of UK debt collection

Executive summary

Using digital channels like email and SMS for debt collection is moving from theory to reality, but much work remains to be done to ensure mainstream acceptance.

In May 2014, GBGroup sponsored a roundtable discussion to find out the steps the industry must take to implement compliant, efficient digital collection processes.

Delegates from all areas of debt collection reaffirmed the huge potential of digital to reduce costs and increase collection performance. They reported growing demand from younger debtors to use digital channels for contact which are seen as less intrusive and more convenient; this experience is backed by recent research figures. Key applications for email and SMS include tracing and making initial contact with debtors, as well as ongoing customer management.

Both debt owners and collections agencies are already using email and SMS after obtaining permission via the call centre, but few are employing it for initial RPC (Right Party Contact) and tracing as yet. Webchat and digital payments are two other key areas where digital channels are already in use, and growing rapidly. To underpin future success, the digital experience must be made as seamless and as easy for customers to use as possible.

Much has already been learned by early adopters. The panel shared their experiences, confirming the need to verify identity before sending, to use appropriately anonymised sending methods (“soft” messages) in case the message reaches the wrong person and then to ensure that the correct person has been contacted. Specialist suppliers will be critical enablers of compliance. They can append new email addresses and mobile numbers to customer records and verify existing digital contacts, and are able to show the data’s provenance via an audit trail – so providing clear evidence that reasonable care has been taken to check identity. The industry also needs to build expertise and formulate best practice in email and SMS systems as well as in other new areas like email deliverability.

However, a lack of clear compliance guidelines is still holding back greater adoption of digital for all kinds of collection work. For example, which checks should be carried out on data passed to a collections agency from a third party? Most companies are afraid to experiment lest they make errors which fall foul of the Financial Conduct Authority. Current compliance advice from industry bodies and regulators regarding contact permissions and identity verification is far too vague to base complex operational procedures on.

Advice is urgently needed. Industry associations and governing bodies like the CSA and the Lending Standards Board must reach a consensus, then jointly approach the FCA to formulate best practice procedures that can be adopted across the board. Only then can both the industry and its customers truly benefit from digital adoption.

Digital communications for collections

In May, senior figures from the Debt Collection community gathered at the Grosvenor House Hotel, London, for a roundtable discussion on how best to encourage mainstream adoption of digital channels like text and email in collections work.

Entitled Digital Communications for Collections: The Art of the Possible, and sponsored by identity intelligence specialist GBGroup, it followed on from an initial 2013 discussion on the use of digital media. This year, a panel of experts from debt purchasers, collections agencies and creditors looked at how the industry is now using digital channels and the best ways to broaden implementation in light of recent legislative and regulatory changes.

The potential for digital Delegates

agreed wholeheartedly that there was great potential for the use of digital in collections, with the use of text and email, along with other digital channels like webchat, growing hugely in recent years. One speaker noted that younger customers often asked specifically to be contacted by email and text. Statistics gathered by GBGroup from YouGov, Demos and Ofcom back this up:

• 75% of debtors are aged under 45
• 29% would prefer initial contact by email
• compared to 8% by post
• and 32% by telephone

Driving down costs as part of a fully digital collections workflow is a key benefit the panel were looking for, cutting out the expense and complexity of posted paper communications, but there are many other possible advantages. The instant audit trail text and email create is one of them, along with the opportunity to increase call centre staff utilisation by letting them work on emails when not busy with calls.

Adding digital to RPC (Right Party Contact) tracing options could make a real difference to success rates, especially where the current address held is invalid. A delegate from Arrow Global commented,

“RPC can be quite a challenge on certain customer segments (e.g. Goneaway customers)… Any option that improves our ability to establish contact with customers is welcomed.”

The panel unanimously concurred that email has great potential for tracing. A delegate from dlc said,

“So many of our customers will never speak to us. If email could open the door, that could make an immense difference. But advice coming out of the OFT to date has been very much focused on performing customers who are engaged with us.”

M&S Bank’s delegate added,

“The biggest opportunity is to use digital as a low cost way to engage with the customer upfront as an additional RPC tool. And that’s where we struggle and hit all the compliance hurdles.”

The ease of researching a debtor’s contact history is another digital benefit. To catch up with an ongoing case, an agent could quickly scan previous text and emails. One comment was,

“It can be a cumbersome process to pull in calls and go through and listen to them along with the notes on the system.”

The panel also noted the benefits for the customer of less intrusive outbound communications. Once they have received a text or email, they can call back when convenient.

Where are we now?

All the companies on the panel were currently collecting emails when in contact with verified customers and gathering permissions for their future use. However, only dlc and M&S Bank are actually employing them for ongoing collections contact.

dlc’s delegate explained: “We have a system where if customers wish us to send a letter by email rather than post, we can do that. Our problem is lack of data; we’ve only got tens or hundreds rather than thousands of emails.”

“For those customers who do take it up, they find contact via mobile and email useful. Anecdotally, we have comments like, ‘thank god you do that.’ Many don’t want letters arriving and lying about in the hallway.”

dlc had just started using emails for tracing. It had sent close to 60,000 emails in this way, but no results were available. Messages were along the lines of, “Mr Smith, we are trying to contact you about a personal matter. Please call us on this number”.

“It’s a one-hit strategy because there’s not really much more to say after that,” their delegate said. “We’d like to move from the soft email to a collections approach but that would require really clear guidance.”

Already using webchat for sales, Santander is now trialing it for collections. Their delegate explained that because both parties were using a computer, webchat allowed their agents to put documents like agreements and statements of account in front of the customer.

“You can sort out problems right there and then,” she said. “Instead of having to send documents out for a wet signature, it will all be done on webchat.”

Digital payments

Panel members thought online payments were the fastest growing digital channel used by the industry and that sending a link within a text or email to take the customer straight to a secure online payment portal has great potential to automate collections. Where customers have agreed a payment plan, Santander sends them a text on the day they are due to pay saying, “payment reminder, ignore if you have already paid.”

“Customers who have indicated in a call that they want to make a payment receive the text messages,” explained their delegate. “Then they can save it to their favourites and make payments very quickly in future without needing to contact the bank or DCA.”

dlc started tracking its Internet payment volumes in October 2013. Though overall numbers are still small, payments via that channel have already jumped by almost three-quarters. Internet payment options are included in the company’s letters, text messages and in call centre IVR messages.

Controlling secure access and ongoing identification are challenges here. For customers to adopt this digital workflow, it has to be seamless and as simple to use as possible. Helping them choose memorable ID verification passwords is one aspect of this.

M&S Bank noted the low customer uptake of automated outbound calls with recorded messages offering payment options. “You have to make the verification process as easy and painless for customers as possible or we will just lose them.”

Compliance challenges – verifying identity for email

The desire to employ digital more widely is definitely there but, for creditors, debt purchasers and DCAs alike, fears over compliance are still restricting operational use for both initial (RPC) and ongoing contact. The tough takeover by the new regulatory regime has instilled even more caution. That’s in spite of many customers asking to be contacted via email, text and webchat. Again panelists noted demand coming overwhelmingly from younger customers.

Santander’s delegate said,

“A lot of customers are quite willing to give us their email addresses. We’re just storing them on our database at the moment. They will say, can you email me that letter, can you email me that document, but we can’t do that at the moment.”

Panelists repeatedly mentioned that their internal compliance groups were demanding clearer guidelines before they would allow digital channels to be used. Compello Group’s delegate commented, “Our collectors will take email addresses and record that they have consent to use them. But everyone seems to be terrified of email. Is the FCA going to slap our wrists? Are we going to fail audits?” 

Advice from industry bodies and the regulator is too vague to base real-world operations on. Take a 2013 guidance document use, format and content of standard Debt Collection Communication produced by
the Credit Services Association (CSA) and Debt Buyers and Sellers Group (DBSA) in association with the Office of Fair Trading (now superseded as consumer credit regulators by the FCA). It offers this advice on emails. “The nature of the business relationship and account-sensitive information should not be included in the email, unless the email address has been verified and authority to use it has been obtained from the customer.”

The sticking point is the level of verification and permission seen by the FSA as acceptable. An email or mobile number gathered from a customer along with permission to use it must surely be compliant but what about emails passed from debt owners or appended by third parties? Again guidance is so vague as to be almost useless.

CSA advice is to, “take reasonable steps to verify that the email address obtained is valid and is an acceptable form of communication”. For “trace and collect” postal addresses, the CSA says DCAs should first carry out “reasonable tracing and verification checks”. In addition, the OFT has told the CSA that, “it would expect further checks to be carried out in circumstances where there have been problems with a specific client.” Compliance challenges – making contact Following on from verifying before sending, collectors must then be clear that they are in touch with the debtor – and no-one else. Delegates discussed whether this means it is always essential to use a soft message to gain permission for future contact as part of RPC (Right Party Contact) procedures. FCA advice (for printed letters and calls) states that, “A firm must not disclose details of a debt to an individual without first establishing, by suitably appropriate means, that the individual is (or acts on behalf of) the borrower or hirer under the relevant agreement).” Further FCA advice (Consumer Credit Sourcebook April 2014) says,

"A firm must take reasonable steps to ensure that third parties do not become aware that the customer is being pursued in respect of a debt.” But what if a wife or partner sees an email?"

The panel said that their compliance worries were compounded by guidance from the OFT that email and text should be considered “insecure” methods of communication and that their “primary purpose should be to instigate contact with the customer and not to demand payment”. So can email and text never be considered a private channel to an individual?

The allowed frequency and timing of email and text contact are also unclear. FCA advice states, “A firm must not contact customers at unreasonable times”. However, several members of the panel noted that email and text are far less intrusive than an outbound call, with customers able to choose when to read or reply to them.

The issue of ongoing email permission caused further concern. Even if you are the debt originator, how often do you have to be in touch via email and how long can it be since the last email contact to make compliant use of that email possible? Compello Group’s delegate asked if it might be possible to include email and text contact for collections in a customer’s original terms and conditions.

Moving to best practice digital processes

Based on these compliance concerns, panelists emphasised the need for well-defined best practice processes to govern digital’s use, just like all other aspects of modern collection. This would not just build compliance into operations but would also homogenise the processes used by clients, DCAs and subcontractors, helping avoid unintended mistakes and massively reducing the administration for everyone.

Arrow Global’s delegate noted that his company spends, “a lot of time on gap analysis looking at industry best practice and guidelines, specific client requirements and Arrow Global’s own customer policies and procedures to ensure fair treatment of customers. If everyone knows what to do and what to expect, if training materials and processes are consistent, then the whole job is a lot easier with better customer outcomes.”

The panel strongly recommended that the initial industry target should be to clarify compliant processes for RPC use of email and text. One comment was, “We need to get that part worked out first, never mind the two-way conversations.”

First, verify identity before sending

The panel then discussed what best practice advice could be distilled from current experience, looking first at email verification challenges. dlc had found around 30% of client-supplied emails used for tracing were invalid. Their delegate also noted that mobile and email contact volumes available from clients in both contingent and debt purchase work was disappointingly low. Volumes improved where the data involves a younger demographic and products bought online and via email, such as student insurance.

Delegates noted the ability of specialist suppliers to append email addresses and mobile numbers to customer files in the same way that landline numbers are added now. Suppliers can also verify existing email and mobile contacts against reference data to give increased confidence that they belong to a particular customer. This would probably satisfy the need to take “reasonable steps” to verify identity before sending.

M&S Bank’s delegate said, “We want to sit down with our compliance department and start to look at potential reputable sources of data that would give us extra returns. If you have two emails for the same person, the ability to multi-verify an email against different sources is very useful. It gives extra confidence that you have the right person.”

Delegates agreed the ability to audit any externally-sourced contact data if there were ever an escalated complaint would be very important. A GBGroup delegate explained the company’s ability to track any email or phone contact back to its source and to prove that it was collected compliantly.

The use of “soft” emails and texts to establish contact

With email addresses first verified as accurately as possible, the panel agreed that an initial email or text sent must always be “soft” and seek verification of the recipient’s ID and permission to use that channel – even if permission has already been gained from that individual for email or text contact. dlc’s delegate advised, “If a mobile phone number or email leaves a company and is passed to another supplier, we must go through that initial contact process again. We won’t know the last time contact was made.”

In case someone else reads them, these soft messages must be bland to the point of anonymity, merely asking the recipient to call a number. Any further details might betray its true purpose.

According to the FCA, where a firm has a name which indicates its debt collection activities, it must ensure that, “its name is not shown so that third parties may see the name on the firm’s communications.” Delegates concluded that meant that the email sending domain must also be unconnected with debt collection. GBGroup explained that experienced ESPs (Email Service Providers) commonly set up and maintain multiple sending domains and IP addresses for their clients.

To make a message as private as possible, dlc’s delegate explained how his company puts “Private and Confidential” in the header and adds the content as an attachment. That effectively acts as a “double envelope” in case someone else has access to the account. To read the contents, they have to open the mail and then open the attachment; nothing is shown on the email preview screen. This method was pre-checked with the CSA in 2013.

However, asking a customer to verify their identity by text and email within “soft letter” constraints is always challenging. Because the message must be ambiguous, the panel predicted response rates would be very low. If you don’t say who you are, how do you get anyone to call you back?

“We need to get consent from the customer to use email as the method of communication but we need to communicate with the customer to get that,” commented M&S Bank’s delegate.

According to M&S Bank, this already often happens with phone calls. “They are called out of the blue and asked for their name and address and other ID details without being told why they are being contacted. It often ends up in a Mexican standoff.”

Delegates agreed that these initial soft emails should immediately steer the recipient towards a voice call rather than a digital response, as voice call processes fare proven, compliant and well understood by the industry. Ideally, the panel would like to move from using only soft emails to more traditional collections messages, but that would require extremely clear guidance from the regulator.

Systems and services to manage email and text

As well as lacking proven, compliant digital collection processes, the panel noted that the advanced systems and services needed to send and manage email and text also challenge the collections industry. All delegates agreed that, in comparison to their phone systems, their email capabilities were rudimentary.

Arrow Global noted that the lack of integration between the multiple email delivery systems used across subcontracted DCA suppliers can mean that no data is captured on delivery, read and open rates. Without those metrics, it’s hard to measure whether email is succeeding or failing. GBGroup gave a brief explanation of how the outsourced email systems provided by good ESPs offered secure, compliant sending capabilities with real-time metrics available on read, open and click-through results.

There were also worries over whether outbound emails would be caught in ISPs’ spam traps. How could the industry ensure their outbound emails would reach customers’ inboxes? A GBGroup delegate briefly discussed some of the techniques that experienced ESPs use to maximise deliverability, such as checking emails for “spam-like” content, reputation management and accreditation with ISPs, sending rate and list hygiene.

GBGroup also explained the ability of good email systems to use historical data on email opening times to work out when to send each email so that it has the best chance of being opened. The panel noted the valuable role of specialist suppliers can play in appending and verifying digital contact data, advising on email deliverability and compliant sending, and providing consultancy on all aspects of digital communications.

Conclusions

Digital collections are happening now. The industry is already using text and email for initial and ongoing debtor contact, but only at a small scale as yet. Some DCAs and debt owners are already running digital trials, while others want to start tests of their own. Compliance fears are the barrier to further adoption.

The panel collectively stated that the industry is determined to adopt best-practice, compliant processes right from the start and demanded clear direction from the relevant parties. Action must start with consensus between industry associations and governing bodies like the CSA and the Lending Standards Board. They can then jointly approach the FCA in order to find out precisely what can and can’t be done with text and email.

With clear boundaries and best practices to work with, the collections industry can start to benefit from digital – and so can its customers.