New Regulations in UK Will Hurt Debt Collection Success, FICO Survey Finds

New regulations being considered by the U.K. Financial Conduct Authority (FCA) will drive up collection costs and hurt collection rates. That’s an early finding from a new study being released next month by FICO (NYSE:FICO), a leading predictive analytics and decision management software company, and Market Force.

In the survey, 67 percent of respondents agreed that new FCA regulations would add significant costs to the debt collection process. Nearly as many (64 percent) said that the increasing burden of regulation will negatively affect collection rates. FICO and Market Force surveyed more than 180 UK executives with responsibility for debt collection and recovery.

Bankers, who are used to a high degree of regulatory compliance, are the least worried of respondents, with just 51 per cent concerned about the impact of new FCA regulation on collection rates.  By contrast, 75 percent of respondents from debt collection agencies are worried about rising costs, and 79 percent are concerned about impaired collection rates.

“Collection agencies and departments in the UK are trapped between a harsh economy and a tighter regulatory environment,” said Nick Walsh, director of Global Business Consulting for collections at FICO. “Unfortunately, it appears that uncertainty over FCA regulation is causing many collectors to stall investments in technologies that would help them spot problems earlier and work more productively with debtors.”

The FCA will take over regulation of consumer credit from the Office of Fair Trading in April 2014. The new regime is expected to be more rigorous, with debt collection and administration falling into the FCA’s higher-risk lending category.

“Given that compliance is non-negotiable, debt collection agencies should seriously consider investing to upgrade their processes and systems to handle the new regulatory regime without compromising operational performance,” said Juliet Knight, director of Marketforce. “The flexibility afforded by more advanced collections systems will serve both compliance needs and the bottom line.”

FICO (NYSE: FICO), formerly known as Fair Isaac, is a leading analytics software company, helping businesses in 80+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction. The company’s groundbreaking use of Big Data and mathematical algorithms to predict consumer behavior has transformed entire industries. FICO provides analytics software and tools used across multiple industries to manage risk, fight fraud, build more profitable customer relationships, optimize operations and meet strict government regulations. Many of our products reach industry-wide adoption – such as the FICO® Score, the standard measure of consumer credit risk in the United States. FICO solutions leverage open-source standards and cloud computing to maximize flexibility, speed deployment and reduce costs. The company also helps millions of people manage their personal credit health. FICO: Make every decision count™.