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SA can learn from UK debt collections industry

Cape Town - South Africa can learn a lot about the debt collection industry in the UK, according to Blake Group’s global head of sales Tracey Swart.

Swart discussed the benefits of a more regulated industry for both consumers and credit providers.

"South Africa and the UK might be on different continents, but they face similar issues, which means that the UK often acts as a barometer for what’s coming to SA," said Swart.

The UK has undergone many changes over the last decade regarding its levels of regulation and compliance. The most significant has been the concept of treating customers fairly (TCF).

The starting point was an onus from legislators to bring “simple English” to documentation around debt and credit. The thinking was that people involved in the signing of these legal documents have got to understand the terms and conditions to be able to accept them.

Since then, the UK has seen a significantly elevated level of regulation and compliance, according to Swart.

Credit providers are facing much more accountability when it comes to affordability assessments and reviews. There have also been substantial changes in terms of qualifications.

Debt collectors must be registered with the appropriate financial conduct authorities, and face strict requirements around technology and data security. The level of monitoring goes right down to whether collection agencies are enjoying undue profits.

All of this is in pursuit of fairness in which both parties are happy: the credit provider with the amount of risk they’re undertaking and the consumer with the terms of their credit agreements.

"The biggest reason for the success of the UK debt legislation is that regulators have strong methodologies in place to enforce the legislation. There have been recent cases of UK companies refunding consumers in the region of hundreds of millions of pounds because they’ve failed to show TCF practices," said Swart.
 
"The UK collections industry is in a much better state as a result of TCF approaches. Consumers are more educated and enjoy greater protections, which have allowed the collections market to mature and credit providers to undergo less risk."
 
SA is not at the level of the UK yet when it comes to legislation. While there is an awareness around TCF and educating consumers around their rights and responsibilities, SA's ability to implement is challenging, Swart pointed out.

This is all set to change as there are presently a number of cases before the courts where consumer rights have allegedly been abused. Governmental bodies are looking at legislation more closely with an eye on ensuring there are checks and balances in place around credit agreements and affordability assessments.

"From our own collections point of view, we are seeing an increasing number of our customers who are willing to adopt negotiation platforms when clients cannot pay, as opposed to the more rigid approaches of the past. As a result, the success rates around collection and building brand affiliation are much higher," said Swart.
 
"South Africa may not follow the exact path as the UK, but the signs are there that it’s on a similar track. As long as government continues to introduce stronger legislation and enforcement practices, and credit providers operate according to the principles of TCF, we should see similar benefits."

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