As UK banks consider the appointment of debt collectors to recover tens of billions of pounds of government-backed small business loans, other financial institutions across Europe are faced with a similar challenge, their next move will be driven by one overriding factor – protecting their image according to new research by Hoist Finance.

A survey of 28 European banks conducted by the credit management specialist, which purchases and manages non-performing and performing loans across 11 countries in Europe, found that almost nine out of ten (86%) ranked ‘protecting our reputation and image’ as the single most important factor in selecting a debt collection agency to tender for their business.

The reputation of the agency itself and their standing in the market was also critical (ranked important by 71% of respondents), far outstripping any previous costs or bids that might have been quoted for their service (18%). Whether there is an existing relationship between the two entities is not a key determining factor.

When it came to the final decision making, protecting their reputation was still more important than price: 85% citing it as ‘fairly’ or ‘very’ important (the two top rankings), though the importance of price leapt to 81% (for the same two rankings combined). The agency’s experience was also vital (62%).

Banks assessed a debt collection agency’s ability to protect their reputation on their approach to treating customers fairly. An amicable collection strategy – in which an agency arrives at a consensual agreement with the customer – was deemed very important by 38% of respondents, though perhaps surprisingly of least importance or only somewhat important by a similar percentage (42%).

In terms of sustainability, respect for a customer’s privacy was ranked highest in priority (17%) followed by empathetic treatment of customers (15%) and having a thorough complaints handling process (15%).

Julian Winfield, Chief Executive of Hoist Finance UK, says that to the banks, getting paid for the portfolio they are selling or putting out for collection is obviously important “Clearly they would like to recover some of their outstanding loans, but it’s clear also that price is far from the only consideration. Banks are worried about their image and how they will be perceived in the market by existing or potential customers.”

“It’s also clear that they genuinely care about the treatment of their customers, even after they sell the claims to a collection agency. It is vital, therefore, that we, as an industry, continue to balance the need of an economy that relies on a creditor being repaid with the need to identify the most vulnerable in society and ensure our practices support them in resolving their financial difficulties.”