Tracey Swart, Blake Group’s Global Head of Sales.
Credit providers, beware! TCF is set to radically alter the face of the South African collections industry. Blake Group’s Global Head of Sales, Tracey Swart unpacks what you need to know.
There’s been a great amount of discussion around treating customers fairly (TCF). This concept, centring on the equitable treatment of customers throughout the customer lifecycle, will form the basis of new legislation, education and guidelines in South Africa.
We are already seeing the first legislative changes influenced by TCF. The National Credit Amendment Act calls for more stringent control around the prescription of debt. One high profile case currently taking place before the Western Cape High Court is challenging existing legislation around emolument attachment orders (EAO). Should the challenge be successful, we could see substantial changes around the issuing of unsecured loans such as payday loans.
If current trends are to be believed, there will be more to come. In the UK, TCF has ingrained itself into the fabric of the financial services industry and South Africa has historically closely followed its lead in collections trends.
Much of the discussion has revolved around the provision of financial services, with considerably less information out there around how this will affect the collections side. The greatest impact will be on the pre-collections phase – consumer education, affordability assessments and contract wording being the primary manifestations.
The best example of this has been the drive to make contracts easier to understand by the average consumer. Instead of couching terms in complex legalese, we have seen contracts move towards ‘plain English’. Today, many credit providers have translators that can help explain the terms of a contract in an alternative language the consumer understands.
Despite the current emphasis on TCF, there is still a lack of awareness in some sectors as to what exactly it means. In a poll at the 2014 Insurance Institute of South Africa’s (IISA) conference, only about 55% of the one thousand-strong audience knew how many outcomes were contained in the TCF framework.
One misconception about TCF from credit providers and collections agencies is that the boundaries imposed by TCF will open the door to a culture of non-payment as consumers hide behind the law. TCF does not give the customer the power to dodge repayments. Rather, it ensures that the terms of repayment are created in such a way as to deliver satisfactory outcomes to both debtor and creditor.
Credit providers that do pursue fairer customer outcomes, such as alternative repayment options when a customer is unable to fulfil their debt obligations, enjoy higher rates of customer satisfaction and retention. According to McKinsey, 70 per cent of buying experiences are based on how the customer feels they are being treated. Meanwhile, Accenture has found that poor quality of service beats price in determining customer churn.
In implementing ‘plain English’ contracts that are easier to understand, companies would also have a lower burden of training their staff in complex legal language. The more simplistic you make the borrowing process, from the way documentation is structured to how assessments are carried out, the easier it is for the consumer to enter into debt contracts. The TCF-focused organisation is quite simply a more practical and efficient one.
For those companies that choose not to engage with TCF outcomes, the picture looks pessimistic. Using the UK as a barometer, we should see much stricter enforcement of legislation that protects the consumer, leading to hefty penalties for non-compliant parties. It is up to credit providers to act now with regards to self-assessment, and incorporating the six outcomes of TCF into their overall strategies.
These six outcomes are:
• Customers can be confident they are dealing with firms where TCF is central to the corporate culture
• Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly
• Customers are provided with clear information and kept appropriately informed before, during and after point of sale
• Where advice is given, it is suitable and takes account of customer circumstances
• Products perform as firms have led customers to expect, and service is of an acceptable standard and as they have been led to expect
• Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch providers, submit a claim or make a complaint
As we can see above, TCF requires organisations to embed the fair treatment of customers into their culture and governance models. The result of this is that although TCF may have little impact on the collections process itself, we will see fairer collections strategies arise naturally from the overall organisational culture.
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