The debt collection industry has witnessed enormous change over the past few years. Mark Beyer looks at how services have evolved.
FOUR years ago, the debt collection industry in Perth was dominated by locally owned and locally run firms.
Then along came a group of big national companies that were going to change the way the industry operated.
The national companies certainly changed the shape of the industry, as they bought up many of the independent operators.
Yet their impact at an operational level is very mixed and in some important respects the industry is reverting to an old business model.
“I think the call centre approach failed,” Bunnings national credit manager Ian MacDonald said.
“You didn’t always know the people you were dealing with, and you didn’t know their qualities and skills.”
Bunnings now uses two relatively new firms, National Credit Management and Pioneer Credit Management, that highlight their local service focus.
“They run on a very localised basis. The people are all in Perth,” Mr McDonald said.
One of the biggest changes in the industry over the past few years has been the growing trend towards the sale of ‘distressed’ debt ledgers.
Firms like Perth-based Repcol buy the debt at a discount to face value and then retain all of the funds collected.
The profit depends on the recovery rate and the costs incurred in that process.
This contrasts with the traditional commission work, where debt collectors act as an agent for their client.
Repcol’s chief operating officer, John Wreford, believes the trend has been driven by two factors.
First, the big stock market-listed firms have access to capital, meaning they can afford to purchase multi-million dollar debt ledgers.
Second, the banks and other credit providers have recognised they could achieve a better return on their funds by selling debt ledgers.
Repcol’s current portfolio of debt ledgers is about $500 million and managing director Peter Di Prinzio said there as “a similar amount on the negotiating table”.
The company’s revenue is split about 50:50 between debt ledgers and commission work.
Its main clients for commission work include AlintaGas and the departments of housing and works, justice and education.
Mr Wreford believes a mix of commission work and buying debt ledgers makes good business sense.
National Credit Management takes a contrary view.
Regional manager Stella Napier said National specialised in commission work, an approach that had helped her firm secure new clients.
Pioneer Credit Management is another firm that specialises in commission work.
Managing director Keith John believes the industry’s biggest change over the past few years was a shift to “more of a call centre-type environment”, with listed companies leading the change.
“We are now seeing people, certainly in WA, going back to traditional services,” Mr John said.
“We are providing a service that requires personal attention.”
Repcol’s Mr Di Prinzio concurs with the view that personal service is critical.
“You can have as many automated services as you like but at the end of the day you need people dealing with people,” Mr Di Prinzio said.
“It gets down to developing people skills and teaching them [staff] how to be good counsellors.
“Half the battle is winning people’s trust. Once you do that, then you can negotiate some sort of settlement.”
Ms Napier believes the Internet has had a big impact, with clients having secure online access to individual customer files.
This makes the debt collection service more transparent and makes the firms more accountable to their clients.
While online services are helpful to clients, Ms Napier said new technology had not fundamentally changed the way in which National operated.
“The agent still has to have the personal touch,” she said.
Mr John describes Internet technology as a useful support tool.
“The technology is not what drives the business,” Mr John said. “Our account managers drive the business.”
Ms Napier said the larger firms were also offering broader credit management and information services, such as online access to detailed bankruptcy data and court records.
This puts firms such as National Credit and Collection House in direct competition with the traditional providers of these services, including Baycorp Advantage and Dun and Bradstreet.
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