Nick Ollard, head of debt sale at TDX Group, looks at post debt sale reporting and customer level selling
Reporting to credit reference agencies (CRAs) on your customers’ accounts post sale has been debated by the industry for a number of years.
The process of how this is done is often based on what is deemed the easiest and quickest solution, meaning there is no one standard approach.
At TDX Group, we believe this inconsistency is unfair. It feels as if this is one of the last hangovers from the days where highest price and speed of transaction (ask no questions) were industry standard practice.
The inconsistent approaches adopted can mean consumers find that what is recorded on their credit report is dependent on who is selling the debt and who is buying it.
In a world where customer treatment and fair outcomes are at the heart of everything we do, is it right that the sale of an account may show up differently on one consumer’s credit report compared to another, depending on which companies are involved in the process? The impact of this is that their ability to manage their financial affairs will vary.
There are currently three accepted methods in the industry on how a credit record can be transferred from a seller’s to a buyer’sCRA portfolio. They are:
1. Delete and re-add: Where a seller will delete the entire credit history and then the buyer will re-add the account, with no history in their monthly CRA submission.
2. Full transfer: Where the complete credit history is transferred by the CRA from the sellers to the buyers portfolio.
3. Flag and re-add: Where a flag is marked on the sellers record indicating the account has been sold and a new record is opened by the buyer.
It is common practice to see all three of these methods being regularly used throughout a single year of transactions. The industry data sharing oversight body, Steering Committee on Reciprocity (SCOR), recently issued guidance putting the responsibility onto the sellers and buyers to agree a process.
However, at TDX Group, because we act in the centre of the industry, working with buyers and sellers on transactions, we have seen issues with all of the methods and none of them have shown to be fool proof.
Some examples of problems include: duplicate records being live for a consumer; no records being available; or the flag not being marked before the new record is uploaded – all of which have a different impact on the consumer.
At this stage we are not calling for one method over another, although we do believe it is time to stop option 1 (delete and re-add). This is the method often used because it is the most straightforward process, and yet the impact on the consumer hasn’t been fully assessed.
If you asked creditors how they would treat a customer who had an account on their history which started with a default – what do you think the answer would be?
At TDX Group, we’re calling for the industry to go through a considered review and ensure that all parties thoroughly understand the impacts; not only the impact on a customer’s credit record at point-of-sale, but also for the following years thereafter.
We’re also developing ways to improve transparency across the industry and have recently developed a fresh approach to segmenting assets before they’re sold. Customer Level Selling enables purchasers to buy accounts where they already have a positive relationship with the customer, using the unique data and delivery partnership of TDX Group and Equifax to see thing differently.
Ultimately the outcome we’re all striving for is one of consistency – that is what we ask of our regulator and we believe it only fair that we strive for the same outcome in our processes.
In 2016, with the majority of our industry having achieved or nearly achieved FCA authorisation, it seems totally at odds that consumers could be disadvantaged depending on which debt sale process they find themselves in.
To find out more about customer level selling watch our video or get in touch direct: vimeo.com/166256124