Debt recovery is currently undergoing a major image change and the perceived competition between external agencies has helped to improve the service clients receive.
Solicitors have historically been viewed as the professional arm of debt recovery who act with absolute integrity and concentrate purely on those matters which require legal activity. Debt collection companies have tended towards other methods of collection, appealing to a different sector of the market.
Now solicitors are beginning to expand their services portfolio. Telephone collection work and contracting doorstep collection companies have allowed solicitors to compete in a market sector they have not entered before. They have always had the edge in quality of staff. More importantly, solicitors can provide the technological back-up to carry out these functions as well as, if not better than, many debt collection agencies.
It has long been recognised that the key to effective collection is automated administration of day-to-day work and functions such as accounting, statistical analysis, collector performance, lettering and diary facilities are now fully automated. Solicitors have long been seen as dependent on paperwork, having to work in triplicate to satisfy Law Society rules, but this is not necessarily still the case.
In some areas of debt collection, paper files are almost non-existent; collection systems can also track correspondence, monitor payment and spend patterns and log the history of an account without recourse to the photocopier.
This speeds up the collection process and allows collectors to see an up-to-date position at a glance. Statistical and status reports can be done more quickly than is possible with paper files and human resources are allocated more appropriately, maximising collection performance.
Good debt collection is a form of debtor education and IT systems ensure the course of action the debtor has been told may happen does, and on time. Effective collection also stems from an ability to allocate sufficient resources to a client while maintaining the best possible net return. Technology can project the performance of a debt over a 12-month period based on factors such as promise to payment ratios, fall-out rates and general delinquency levels. Much of this analysis also enables lawyers to examine their costings carefully, which helps keep prices more uniform.
Supporting a collection system is now a full-time occupation and many firms have a dedicated team of people constantly updating the day-to-day functions of the collection system. This works out as less expensive in terms of external support and also means adaptations can be implemented quickly – debt collection demands continual investment in technology in order to stay ahead of rivals.
The advent of one-stop shop debt collection among solicitors' practices means more are now adopting advanced techniques in front-end, out-bound, proactive telephone collection. Linked with the ability to adopt bespoke collection strategies according to debtor demographics and client requirements, solicitors are becoming a strong force in the world previously dominated by debt collection agencies. Predictive dialling technology and power diallers are no longer a myth but a reality, and many large institutions are turning towards solicitors for a fresh view of their own collection work.
Another issue in debt work is information management. Solicitors often rely on the income generated at the month's end rather than analysing the income generated by action – collector performance, response and payments received on particular letters etc. But as clients become more sophisticated so do solicitors. Today's clients demand closer scrutiny of ongoing performance, such as monthly tranches of debt, the turnaround time of actions, or the response received to an initial contact letter.
Hi-tech systems can provide this data and more. Many systems operate on a relational database, allowing operators to extract any of the information on the system and compare it in a tailor-made report.
The use of IT in this expanding market has introduced the problem of maintaining a suitable level of automation while keeping the personal touch with clients. But in the increasingly competitive world of debt recovery, those who wish to continue to thrive must employ collection systems to their full potential and continue to be imaginative.