ARTICLE...
CSA Briefing
At the start of 2009 key members of the CSA met with Gareth Thomas MP to discuss a variety of issues affecting the industry. Here is a glimpse at what was raised during the meeting and how the CSA would like to push the sector forward in the future...
CSA would like to raise the following issues.
DATA SHARING
The Association would like to see a considered and balanced review of regulations, which are hampering the genuine process of collecting outstanding money owed to the economy.
Data sharing is an integral part of this. It would allow organisations to identify those most likely to get into debt problems in the first place and so restrict their access to further credit. Data sharing would also allow easier identification and tracing of debtors, enabling early assistance to be offered to those most at risk from getting into financial difficulties and enable those who are in difficulties to be contacted and assisted with repayments. It would also increase the efficiency and amount of debt collected, benefiting significantly the UK economy and reducing the UK's personal debt burden.
The principle has been accepted by the Government which inserted provision in the Pensions Bill to enable the DWP to share its details of state pension credit recipients who are considered fuel-poor with energy suppliers to enable them to target those customers that need assistance. The Government has also indicated that it is considering extending the practice through allowing the sharing of data of people on low incomes with water companies in the forthcoming Draft Floods and Water Bill so that they may be helped to reduce their bills. The Environment Minister acknowledged the impact of unpaid debts on water bills, estimated at adding £11 p.a. on average, saying in a parliamentary debate on 3rd June 2008: "I do indeed recognise the importance of data sharing. I am examining the situation to deal with not only those who cannot pay but those who will not pay and are abusing the system..."
TRACING AND THE ABOLITION OF THE EDITED ELECTORAL REGISTER
In its response to the report from the Information Commissioner, the Government said it should remove the provision allowing the sale of the edited electoral register which would then be abolished. However this would not affect the sale of the full register to credit reference agencies.
It did also say that before committing to this it needed to establish how removing the provisions would have an impact not just on individuals but the economy as a whole and proposed to conduct a public consultation to establish the advantages and disadvantages of the edited register and consider the way forward.
Impact on Debt Collection
The largest problem for companies seeking repayment of debt is the lack of access to information about the whereabouts of debtors. There is no legal requirement for people to notify creditors of a change of address and many relocate without informing their creditors either through neglect or deliberately to avoid their debt obligations. The result is that in 2007 a staggering eight million traces had to take place. This has three major adverse effects:
- Innocent people in a property formerly lived in by a debtor receive phone calls and visits by agents chasing up monies owed. This at the least causes embarrassment and sometimes worse complications arise.
- Debtors who have moved without informing their creditors and who are not traced for some time will have the temptation to take on more debt, especially if they have not had to pay back amounts they already owe.
- Companies, such as utilities and local authorities, incur very large expenses in tracing people which adds to their overall costs, increasing the charges paid by everyone, which is clearly unfair.
Currently, the only form of address registration available for debt collection agencies to use is the edited electoral roll. This is imperfect as not everyone registers and between 20% and 70%, depending on the region, opt not to have their name included on the version publicly available. However, the removal of this resource will make the tracing of debtors much more difficult and expensive.
Desired access to the electoral roll by the direct mailing and marketing industry should not be linked with the completely different requirements of the debt collection industry. We are trying to help people get out of debt, not take on more burdens.
It is illogical that the Government supports the continued use of the full register by credit reference agencies to help institutions lend people money and get into debt but not for the process of recovering sums borrowed and help people get out of debt.
In the absence of a fundamental review of the use of data for collecting debts owed, instead of further restricting access to data by debt collectors, consideration should be given to open, but properly regulated, access to the electoral register.
A Legal Requirement of Notification Required
Extending data sharing and maintaining or even extending access to the electoral roll should be just interim measures in lieu of a legal requirement as part of consumer credit legislation for debtors to register any change of address with their creditors. This would form part of the contract between a lender and a borrower. The data would only be known to the creditor, and regulations could ensure that it was only used for the purposes of collecting monies owed and not for marketing or to be made available to anyone else.
This would remove virtually all the need for tracing activity, cutting costs and increasing efficiency and productivity across the economy as a whole. At the personal level it would lead to a major reduction in the number of people taking on unsustainable amounts of debt.
LICENSING OF TRACING AGENTS
There are proposals by the Security Industry Authority to include tracing agents within their definition of private investigators who require a licence. The way the definition is being drawn will include those who work exclusively on debt collection activity, establishing the whereabouts of people who owe money using desk based research.
The fact that the number of traces has shot up to 8 million per year shows what an essential and legitimate part it is of the debt collection process. Without it, many small businesses, government and local authorities would lose hundreds of millions of pounds, and all utility, insurance and council tax costs would have to increase substantially.
To be included in the licensing regime would mean tracing agents undergoing competency training covering a wide range of activities with which they are never involved such as surveillance, gathering evidence and taking witness statements. Desk based tracing agents have no face to face contact with debtors. Inclusion would also mean a significant cost of nearly £300 for the licence and about £900 for the training. It is estimated that there are 15,000 staff involved in tracing, all of whom will require not just a licence but also the additional training, making the total cost to the industry around £18 million.
Exemption Sought
Section 4(1) of the Private Security Industry Act provides for the Secretary of State to make regulations to prescribe circumstances in which persons will be exempt from the requirement to have a licence to undertake licensable conduct. The criteria to be applied is where there are circumstances in which activities of licensable conduct are undertaken by people to whom "suitable alternative arrangements" will apply and that "as a consequence" it is unnecessary for people undertaking those activities to be required to be licensed.
We believe that this is exactly the case for people who conduct traces. Members of the CSA employing staff engaged in tracing activity have to abide by the CSA's Code of Practice which was used by the Office of Fair Trading as the template for its own industry guidance and provides sufficient safeguards that meet the obligation for protection of the public from office based tracing. It covers all the potential malpractices identified as justification for licensing. There is also no threat of financial loss for a client as there is no 'up front' payment with charges instead set out in an invoice after work has been carried out.
An exemption submission is being prepared and a meeting with the SIA arranged, but it would be helpful if BERR would support the submission recognising the significant cost this would otherwise place on the industry, its customers and ultimately the public.
NOTICES TO "GONE AWAYS"
The Minister has requested that this item not be discussed as it is too wide of the intended agenda. We accept this but would instead like to have a follow up meeting with officials as we believe that although the Government's proposals go some way to addressing concerns about fraud, there would still be personal information being sent to a known gone-away address. The content of the statements may be reduced, but the name and address of the person, the company they bank or have credit with, and the balance outstanding will all still be apparent.
The proposals also do not address the main concern for debt purchasing companies which is the costs incurred to business sending any sort of correspondence to know gone away addresses. It is estimated that some businesses will spend in excess of £500,000 per year on sending these notices as the majority of bought debt is gone away accounts. In total it is estimated that around 50 million letters a year are being sent to out of date addresses. Aside from the huge wasted cost involved, this also causes frustration to those innocent individuals that are residing in the property.
Original article courtesy of CSA. For further information visit www.csa-uk.com/csa/
