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Collecting money and chasing debts is often a difficult and time consuming task in any line of business. In the public sector, it is a challenge faced daily by councils, housing associations and law courts looking to collect a range of payments from taxes and rents to one-off charges and penalty fines.

Now, with the imminent changes to the Consumer Credit Act 1974 that include measures to further enhance consumer rights and redress, the business of debt collection may be about to get a whole lot harder.

Most important for Debt Collection Agencies (DCAs) and their clients to note is the replacing of the current "extortionate credit" test with a test based on unfairness. The practical implications of the unfairness test are huge. If Debt Collection Agencies are seen to collect money “unfairly”, there may be serious ramifications for them and their clients, even leading to debts being totally written off.

This integral element of the Act will apply to all new credit agreements made on or after 6 April 2007. The test will also apply to any existing agreements that continue to exist beyond 6 April 2008. This transitional period for existing agreements will allow creditors to ensure that any agreements that will continue beyond the end of the transitional period comply with the new test.

Having to contend with this new legislative hurdle, let alone the growing sea of personal debt and bankruptcies in the UK, one may wonder how on earth organisations will rise to the challenge.   

Arguably, when it comes to the large majority of overdue payments, the most effective and indeed ‘safest’ strategy might be to take a more ‘softly softly’ approach to collection. This entails being seen to do everything possible for enabling customers to pay up within a fair and reasonable timeframe, only resorting to more direct and formal action when absolutely necessary. 

To make this approach work, the key is to make it as simple and convenient as possible for consumers to pay their dues in a timely manner. At the same time, client organisations or their appointed agencies must be able to handle internally the collections administration process efficiently.

If they are more able to see the wood for the trees in terms of clearly identifying the relatively few serious debtor cases from the majority of late payers and oversights, they will be able to devote more time and energy to the serious offenders. Most important, they will minimise the risk of crossing the new ‘fairness’ line in the majority of outstanding payments situations.     

On all counts, technology savvy bill payment and collections specialists can play a vital role. 

Considering the typical bill payment methods already deployed in the public sector, outside of cash offices, personalised swipecards have for several years become as popular for paying a wide range of bills and debts at post offices and convenience stores across the UK. As anonymity is often key to the consumer when paying debt, a generic swipecard is often an effective means of collecting monies as no one else can know or see what it is that’s being paid. 
 
However, by offering a wider range payment channels, organisations such as councils and housing associations can further maximise the opportunity for their customers to pay.

Recent developments have given customers the opportunity to make their payments 24 hours a day, 7 days a week over the telephone, by Interactive Voice Response, over the Internet, self-service payments at stand alone terminals and by SMS text message. As if this wasn’t enough, they can also make payments via interactive TV!

Let’s take a closer look at some of these new generation solutions: 

Internet Payments - The increase in homes with internet access has been dramatic over recent years. This coupled with the e-citizen national project which is tasked with “raising awareness and driving take-up of Local Authority e-channels”, makes the Internet an obvious channel to promote for payments.

SMS Text Payments – Already, 56 million text messages are sent every day and this figure is set to increase. SMS text demands to be taken seriously as a payment channel and has to be one of the most convenient possible. 

IVR Telephone Payments – Interactive voice response (IVR) is cost effective, easy to implement and use, reducing administration costs and demonstrating increased payment accessibility. 

Self-Service Stations - In an always-on world, people are becoming more demanding and they want their demands to be met instantly. This has fuelled the uptake of queue-busting solutions such as self-service stations which can be situated in areas such as cash offices, libraries, civic centres and shopping malls, allowing customers to make payments at their convenience.

Barcoded Payments - Certain payments are likely to be one-offs, including sundry payments such as parking fines or municipal hire charges. For such payments the ideal payment channel is that of barcoding. The production of a barcoded document and its subsequent electronic payment process reduces the need for costly paper payment processing and allows the customer greater flexibility on how and when they choose to settle.

Direct Debits - Over 70% of the UK population is positively disposed to using Direct Debits as it is one of the simplest ways for organisations to collect payments and gain greater control over their revenue streams. Direct Debits offer great benefits to the customers too: they are simple, safe and fast.  In addition, some payment specialists are now using paperless Direct Debits; a simple sign up process with no forms to fill in, thus speeding up the service compared to filling in paper mandates.

Interactive TV - One of the newest developments in the bill payments industry and currently only available from allpay.net, is the ability to make payments through SKY Interactive Digital TV. Payments through this channel can be made if customers are currently using swipecards. 

Without doubt, the growing range of payment channels available has the potential to make it much more convenient for consumers to pay their bills on a timely basis.

At the same time, with the help of outsourced payment service providers, it has become easier for client organisations to better manage, streamline and reconcile the whole collections process.

The more progressive service providers have the ability to undertake all aspects of the collections process for clients from design, production and mailing of any payment stationery (e.g. swipecards or barcoded bills) through to the provision and continuous development of a comprehensive range of payment methods.

Add to this the daily delivery, via a secure web portal, of electronic data files detailing any payments made, together with the reconciliation of all funds, and one really does have the veritable one-stop-shop solution.

Of course, the Internet plays a pivotal role in all of this. Clients simply require internet access, a web-browser and security clearance. No additional hardware or software is required, and training is minimal. One example is allpay.net’s WebconnecT technology. With WebconnecT, the client can view all the payment information as it comes through in a single stream through a secure portal.

This platform is used to generate reports on exactly what has been paid across all payment channels, providing a level of control and reporting unknown to most DCAs. It’s well proven too, having processed over 25,000,000 transactions in 2006 for local government and housing association clients!

In summary, client organisations now have more reason than ever to closely review their collections strategies. They must strive to find more creative and more people sensitive solutions. These must not be so inherently inflexible and ‘one size fits all’ that they all too frequently run the risk of being accused of using ‘a sledgehammer to crack a nut’.

Better still, with the help of the latest bill payments and collections providers, put as much energy as possible into preventative strategies that encourage customer bills to be paid long before they become real collections issues.    

Jon Land