Can you free up your collectors and recover more?

3rd August 2022

As the world slides even further into difficult times with rapidly rising prices, interest rate hikes and maybe even recession the staff of many collections departments must be expected to become even busier than they already are.  It has become more important than ever to ensure their productivity is maximised and they are not working on cases where the prospects of a successful outcome or the time needed to reach a resolution outweighs the benefit derived.  Regulators are also emphasising the need for collections personnel to spend more time understanding the problems debtors are experiencing and being more sympathetic in the solutions reached.

One of the problems historically has been that deliberate credit abusers, sometimes called First Party Fraudsters, are frequently caught up in general collections portfolios and represent a significant proportion of the total volume of debts.  Their debts are notoriously difficult to identify until after the event when they have gone bad. Collections staff are rarely equipped to deal with such debtors and most of these debts remain uncollected, adding to the mountain of charged-off debt in the economy which is already running at over £5bn a year according to Bank of England statistics.

Institutions are all working tirelessly to identify this malicious credit abuse in an effort to stamp it out, but the industry cannot even agree on a common set of definitional standards.  This is not surprising since it relies at present on identifying the intent behind the fraud and this is virtually impossible until the fraud has been committed and all collections attempts have failed, by which time it’s too late.  Not only has the money vanished, but the collectors have wasted valuable time pursuing ghosts.

Deploying ever more resources on the prevention of this source of losses is laudable but inadequate to the resolution of the problem. In the vast majority of cases, it is bound to fail due to the impossibility of identifying malintent in advance.  This means that collections teams will still have to work through thousands of cases which should never have landed on their desks in the first place and resolutions of these debts will prove no less elusive than they now are.

But are what are the options? Our company provides the third element in the attack on First Party Fraud – ex-post analytics (Jackdaw™ Analytics) and remediation (Contextual Evaluation Theory™) to complement the application-stage and in-life monitoring being undertaken already.

This has enormous benefits for clients as it removes cases from the collections pile which can be identified as having a far greater likelihood to have been deliberate credit abuse; it elicits data from the process of analysing the accounts and then obtaining resolution; and it yields far better results in the remediation process – over 500% more recovered than traditional methods achieve (and this has been independently verified).

The direct benefits to the Collections and First Party Fraud Sector are clear as are the resultant benefits to the Government to include the Treasury in the identification and subsequent clawback of unrecovered taxpayer-backed Business Loans.

It is not difficult to see how the benefits of this approach are going to pay off handsomely in the current economic climate.  Collections from otherwise abandoned debts will be substantially greater and understanding of the topology of First Party Fraud within an institution will be enhanced. Perhaps even more importantly, collections staff will have their time freed up by as much as 35% to concentrate on genuine customers in need of their help and assistance at a challenging time.

We have tried and tested this service with substantial portfolios already and have the systems and infrastructure to handle tens of thousands of accounts at a time.  What is more, there is no need for expensive installation and customisation of software as all commissions are based on a gain-share model.  The path has been well-trodden already and the infrastructure is in place to make this a straightforward means to reducing abortive work and greatly improving outcomes for all concerned.

Chris Metalle, Chief Financial Officer, KM2 Ethical Finance

For more information: Call 01702 789503 or email: enquiry@km2ethical.com

About the company: KM2 are the leading experts in the field of First Party Fraud and specialists in the remediation of misappropriated losses. We provide thought-leadership in identifying and eradicating malintent from perpetrators across multiple sectors and deploy pioneering technology, class-leading collection techniques and practical, hands-on, consulting to deliver remarkable and lasting results.  The Board at KM2 includes Amir Ali O.B.E., Brian Kinch, Ian Floyed and Chris Metalle as well as advisors from the fraud and legal sectors.