Throughout our many years, in fact decades, of dealing with Personal Guarantee issues e have experienced huge fluctuations in how banks pursue Personal Guarantees, both as a whole industry and indeed individually.
Our series of articles provide some insight as to what the main factors are in these inconsistencies.
The areas we consider are:
- Economic cycle – to read this article click HERE
- Bank lending criteria and process – to read this article click HERE
- Bank debt collection process
This is the third and final instalment of our 3 part article.
Bank debt collection process
Will endeavour to keep this as short and readable as possible but there is enough material in this subject to fill a few volumes! It is important to note that by necessity this subject is covered in general terms and there is a massive variation of performance and by bank.
Workload: probably the most consistent issue across all the banks has been how the increased workload has disrupted their collection process. This has adversely affected almost every part of bank debt collection processes, from strategy and division of responsibilities internally and externally to inability to respond in a timely manner, sourcing of documents and closing out on a deal.
Competence: the banks have ruthlessly de-skilled the collection process, and the cost pressure applied to external debt collection agents and solicitors has caused them to de-skill in the same way.
But Personal Guarantees are a complex variant as far as debt management is concerned and this de-skilling has led to increased costs for the banks and guarantors as the matter becomes protracted for the want of someone actually understanding the issue or even at a basic level just having the wherewithal to get the deal done.
Another overriding factor has to be the appropriate direction, management and training provided. As noted above the shift on workload would have provided significant challenges to the banks and we are only privy to some of those aspects within each individual bank but our limited knowledge on that respect and certainly our experience would indicate all is not well with the banks in that regard, despite some very good people working at the coalface on their behalf.
Outsourcing: much of the outsourcing is to debt collection agents and solicitors.
Both have their idiosyncrasies but both are dependent on their own competence, systems and process and, more pertinent to solicitors, their ability to obtain instructions from their bank clients.
I refer below to the issue of overseas outsourcing.
Reorganisation: with few notable exceptions this has probably had the most damaging impact on banks abilities with regard to debt management. The closing down and moving of operations, changes of policies, lack of proper direction and lack of adequate instructions to external organisations have all had an impact on the banks to perform in this arena.
Overseas outsourcing: our statistics demonstrate that the use of an overseas debt management department, whether internal or external, has a devastating effect on the ability of a bank to collect on Personal Guarantees and other banking issues; whether it is with regard to banks solicitors being able to obtain adequate instructions, sourcing UK staff for a mediation or the appointment of LPA Receivers. The adverse effect on actually getting a deal done has a devastating impact on a bank’s ability to collect the debt, and indeed, it's own reputation.
16 September By Mel Loades