One important element in creating a successful debt sale and purchase industry in the UK is for sellers and buyers to gain comfort that the sale will not damage the reputation of either party. Debt sale will only become a permanent feature of the marketplace if sellers are successful in building long-term trading relationships with debt buyers they trust, and if buyers can build enduring franchises based on strong operational capabilities, leading compliance processes, and long-term perspectives on brand and reputation. While debt sellers enjoy the cash flow and operational efficiencies debt sale provides, none of the major selling institutions will rely on it if the proceeds come with significant risks to brand, reputation, or regulatory compliance.
Similarly, debt buyers are constantly inheriting loans and customer relationships which are the problem, or non-performing, cases. A large debt buyer needs to manage the customer relationships and underlying account products from literally dozens of different credit originators. If the account data and documentation provided by the sellers are not robust, the buyer will struggle to manage that customer relationship successfully. It is crucial that the sellers spend considerable time ensuring details such as status codes, addresses, known settlements or disputes, and other customer information are accurate, and that documentation is available to respond to queries such as customers requesting copy documents under the Consumer Credit Act. Failure to provide accurate data and the necessary documents is more likely than any other factor to lead to both sellers and buyers suffering reputational damage and compliance issues.
Debt buyers also bear an obligation to ensure that all of the OFT guidelines, CSA code of conduct, and the terms of the individual debt purchase contracts are fully embodied in their processes and staff training. Ensuring that each of these details is managed and that no compliance issues are put in the "too hard bucket" is a critical success factor. Our experience is that assertive collections activities such as litigation, doorstep collecting, and even the app-ropriate issuance of statutory demands, do not cause reputational damage in isolation. However, these tools can exacerbate situations where other data or compliance problems exist.
The market for debt sale and purchase will be successful and reputational risk minimised if buyers and sellers undertake prudent 'trades' and both sides enter into an agreement that clearly treats the key reputational issues: who is responsible for non-complying accounts, what queries should be escalated, the terms of the post-sale support, etc. Provided both debt sellers and debt buyers show good judgment, common sense, and a long-term perspective that puts integrity at the heart of the industry culture, then debt sale can be an effective tool.