With default rates down but volumes up and FCA regulation soon to come, Simon Shuttleworth of Peak Collections talks to Richard Brown.

Peak Collections was formed in 1989, and incorporated in 1993, making it the longest-running asset recovery agent in the country, according to co-founder and managing director Simon Shuttleworth. Last month it won a shortfall recovery contract with GMAC UK, one of several agreements this year and part of what Shuttleworth calls the "ongoing evolution" of the company’s debt collection work, including the "natural progression" of applying its methodology to shortfall recovery.

"Over the past 24 years of trading," says Shuttleworth, "we have refined our services to provide the best and most cost-effective results for our clients resulting in exemplary cure rates on our first phase repossession and charge-off/profit-share volume."

Peak’s services began with "purely asset recovery, dealing mainly in cars," before expanding into commercial vehicles and plant and equipment recovery, says Shuttleworth, while developing its expertise as a debt collection agency (DCA) within motor and asset finance.

Shuttleworth says: "We’ve always stayed within that niche. We’ve never been tempted to diversify into being a general DCA," which he fears could dilute Peak’s work as a fully-employed field-force company, eschewing sub-contraction and growing by word of mouth from its Macclesfield base. As well as being a DCA, Peak can act as a third-party broker of asset recovery work to other agencies, over which the company keeps technological management of all field systems and documentation. Doing so means Peak can "cover the whole of mainland UK", says Shuttleworth, able to get to any part of the country "within a couple of hours".

Underpinning this, and the GMAC contract agreement, is the case-management and work-queue system built by legal software provider Eclipse Legal System which Peak launched in 2010 following several years of development.

Such a model has allowed Peak to retain control of its work, and such control has allowed it to remain on top of regulation, according to Shuttleworth. The technology has helped win contracts and safeguarded Peak against compliance issues, leaving Shuttleworth confident regulation under the Financial Conduct Authority (FCA), rather than licensing under the Office of Fair Trading (OFT) will benefit the sector and his company.

In 2006 the company gained an ISO 9001 Quality Management qualification from the UK Accreditation Service, which performs an "extremely rigorous" annual audit, backed up by Peak’s two internal audits each year. Since qualification, Peak has yet to have an assessment of non-conformance. In its 24-year history, the company has yet to have a complaint made against it to the OFT and only one made to the Financial Ombudsman Service.

"Which found in our favour," notes Shuttleworth, saying such a history is "testament to our field training and ethos".

Shuttleworth also attributes much of this success to Peak’s technology and explains he is always looking to "take data gathering and integration to a new level in the industry". The latest iteration of which is Eclipse’s system, allowing Peak to set process maps, system triggers and documentation with a client and which, Shuttleworth believes, prevents any field or office employee from making an error.

Richard Brown: How has the company and industry changed in 24 years?

Simon Shuttleworth: We’ve seen particularly big changes all the way through our history – with more professionalism coming in. We’ve tried to drive that and to innovate. When we first started, our finance company clients would have quite a big agent panel, small agents in small areas, and that’s changed; it’s difficult for them to manage and control. We were very early adopters of the national model. In the main, our clients want genuine national coverage.

We’ve recently taken on a national first phase collection contract, with a standard, 30-day process, but we’re averaging six days because we have the coverage. Where we have urgent requirements, because our vehicles are satellite-tracked, we can instantly, accurately estimate how soon we can have an agent on site.

It’s not unusual to find an account was set up in, say, Brighton, and the customer’s moved and the vehicle ends up in Newcastle-upon-Tyne. If you’ve only got local agents, then a case has to come back from one and be reissued to another. You lose that continuity and speed of action.

With national coverage, the minute that happens, the agent in Brighton will notify us at the office and we’ll immediately get our north-east agent in there.

Brown: What are your expectations for the business?

Shuttleworth: Clients are issuing what we would consider ‘reduced’ volumes, but that’s down to the recent recession. Volumes are expected to rise and, over the past three months, we have noted a slight upturn, although that is down to increased business written rather than a change in default rates. We will be monitoring this for our resource planning. At this point, client contracts are performing to expectations.

With the industry in general, we’ve seen a change in attitudes within a collections department. We have to ask ourselves: How are we going to best serve the customer and how are we going to deal with these accounts?

With some clients, we are now attempting to cure an account even after termination and issue to us, as an alternative torepossession, and we are achieving surprisingly high success rates. Even though most of our first-phase recoveries for example have been through a DCA process, we’re still curing around 40%.

That results in a free-of-charge service for the clients because our fees are collected at the same time as the arrears. In our experience, our client’s customer will ensure his or her finance agreement is a priority payment in the future. It’s important to us, to refine and develop our services to provide maximum value to our clients.

Brown: Why are so many clients reviewing their collections?

Shuttleworth: All of our lending clients have their books under control. Default rates are the lowest they’ve been for a long, long time. We’re seeing clients now looking to push the market, pushing new business volume because the default rates are so low. In the last few years, nobody’s been reviewing things; it’s been a case of batten down the hatches.

With collection volumes at such a low, it seems an obvious time to review processes.

Brown: What are clients’ expectations when they sign with Peak?

Shuttleworth: A fast, professional service at a sensible price. Our aim is to make doing business with us easy and hassle free.
If we’re doing our job well, our clients should rarely hear from us. To achieve this, we spend time creating system interfaces, to enable our clients to instruct us easily and to automate the return flow of information. Our management information reports are created to provide our clients with the data they want in the format they prefer. We then set the report to auto-run in our schedules and the system provides the data at the time the client requires it without requiring any input from us. We can programme our reports to run monthly, daily or even hourly if a client required it. We are always looking for ways to improve and share best practice across our client base.

Brown: Are you positive about the collections sector under the coming regulation? Will we see more companies leave the sector?

Shuttleworth: With the advent of the FCA, we’re finally going to be regulated instead of just licensed. It’s a good thing for the industry and it will shake out some agencies which may find such a formal compliance regime difficult.

Because of the recession in general, we’re aware of some agents which have gone by the wayside. In some cases, that’s not always a bad thing.

We need to drive professionalism up in the market and it’s something we’ve been investing in for a long time in terms of training and systems.

Recent consultations with the OFT/FCA reveal self-employed collectors, used by many agencies working on a sub-contraction model, cannot trade under the instructing agent’s licence. Although the OFT does not intend to take retrospective action, this could have an impact on some agencies going forward who do not operate fully employed field staff.

It’s crucial we have the systems in place to force and prove compliance in all of our activities including adherence with the principles of Treating Customers Fairly (TCF), although, that said, just because a customer doesn’t like what we’re saying or doing doesn’t make it unfair by its very nature. We still have a job to do. Sometimes it’s in the customer’s best interest to remove them from the vehicle. We’ve seen cases where a customer had been put on a payment arrangement which wasn’t even covering the depreciation.

It’s not in the customer’s interest to have this level of debt escalating against a depreciating asset and this must be considered unfair in TCF terms.

Brown: How does the system you launched in 2010 work?

Shuttleworth: The system is based around a client record and work queues. This is where system triggers and fees are set. It will only allow a case to be progressed in accordance with the process map agreed with the client and it interfaces with our current field technology. When a notable action takes place, follow up actions are driven according to the agreed client process, including automated communications with the client. Anybody entering data into the system is forced down the correct process for each client. Bespoke reports are created at client level and the system collates the data and sends the reports by email in the background automatically, to the preferred schedule.

It also drives invoicing, ensuring complete accuracy. Any customer payments received are allocated a case-specific code which is used across our accounting and banking programmes and enables simple payment audits.

As the system is maintained in-house along with our developer partner’s support, changes to workflows can be made, in most cases, the same day. System interfacing capabilities are strong and this is our preferred method of managing client placements, although we have numerous available alternatives. With our system talking to client systems and exchanging data daily, it eliminates our clients’ workload in managing cases placed with us and all parties know exactly at what stage each case is, at all times.

We can also deploy our field technology to other agents, enabling us to act as a lead partner in the collections process. This ensures all cases follow process and unifies return reporting. The system handles all of our case types from early arrears collection, through asset recovery and the sale process if required, on to shortfall recovery. At the same time, our back office administrative functions are automated, speeding up our processes further.

We are currently working on a field system which should go live during the first half of 2014, and, again, will be an industry first. It will enable us to personalise and white label client operations if required, gather even more field data and will enable us to drive down time and costs across the collection process.

We’ve been busy on systems development. We took the view some time ago that although we knew our instruction volumes would drop in the short term we were not going to slow up on systems development. It puts us in a good place now to take advantage of a more professional, better regulated market.

Brown: What’s the near and longer-term future at Peak?

Shuttleworth: The market’s changing and we need to continue to engage with our clients to ensure we are adding value to their processes and protecting them from any potential compliance issues.

One area that we are currently revisiting is our complaints process.

Due to staff training in objection-handling and having a policy of spending more time on the doorstep to ensure the customer understands why actions have taken place, our complaint levels are miniscule. However, regulation requires us to monitor this area and we have updated our system to capture the data, both to allow us to monitor any potential trends and to maintain and demonstrate compliance.

We have recently worked with one of our clients to train our staff to their complaint-handling procedures including examinations, to ensure we collect the data they specifically require. We have adjusted our process with this client to ensure our staff sit the examination annually.

In the longer term, we hope to achieve growth through further partnerships with new clients and by continuing to develop our services according to our clients’ needs.