Have I missed anything ?

[Andysport]

I'm embarking on starting a door step loans business.
I am financial services qualified
I have previously held a consumer credit licence and been FSA registered.
So I have applied for a new consumer credit licence & my Financial conduct authority permission.
I have identified my area to trade.
I have my loan documents ready.
I have my processes in place (credit checks etc)
I have my leaflets, promotional paperwork ready and compliant
I have the money ready to lend
I have business bank account sorted and accounting software
Just to say, this business will take 18 months before I can draw any money and almost 4 years before its in a healthy position.
So is there anything I have missed ?

 

[Mark T Jones]

The obvious omission is a collections process. Which also needs to be covered / authorised by FCA. (And without which you won't survive to see pay day)

 

[Andysport]

The obvious omission is a collections process. Which also needs to be covered / authorised by FCA. (And without which you won't survive to see pay day)

Sorry Mark I can only apologise, the name kind of gives it away but maybe I should have been clear. Its a door step loans business so the money will be collected initially by myself on a weekly basis either by way of cash at their door or by recurring debit card payment.

 

[Mark T Jones]

Sorry, that isn't a collections process, simply the easy, first step.

What if they aren't there
Or payment bounces
Or they just refuse to pay
Or can't pay
Or set the dog on you?

In short, any idiot can lend money - the challenge lies in collecting it

 

[Andysport]

My collections process is the same as Providents, Morses, HL4U etc. If there not in then I will need to call back, payment bonuses ? I have no idea what this is. refuse to pay, that's where good personal skills come in, can't pay, these types of loans generally go to people that do require some help or assistance with managing their budgets, overcoming issues such as this is all part of the business, as foe setting the dog on me, well that's a police matter. It seems that you may have some knowledge of this industry, have you ? I have been collecting for another company for some 6 months now, my non payers are below industry average, obviously these are not my customers as I haven't started yet.

 

[Mark T Jones]

I have 30 years experience in lending - including 'soft' collections. I have acquaintances who deal in the harder end of collections

I'm afraid you are being a little naive here. Like I say, lender stand or fall by the quality of their collections - this is the part you really need to think through

 

[Andysport]

Ok thanks Mark, I didn't want to just jump in so I have been collecting on a 125 customer round for just over 5 months, what else can I do ? Do you have any suggestions please ?

 

[alasdair1982]

Have to agree with Mark T a little.

I deal daily with selling / collection loan repayments on a weekly payment basis and i can tell you the collection part is the biggest pain of my business. The majority of my customers are sub prime and they have little or no money management skills. Its never an issue when your selling the products to them, Of course they can afford the weekly amounts but when it comes to the paying for it.. my god the excuses i get are ridiculous... Customer soon forget what the promised when the signed the contract. Its seems to me that a fair chunk of these customers just don't give a **** that they are missing payments and getting into debt.

How do you collect of a customer that doesn't give a monkeys about their credit report and stay within the ever growing FSA rules.? I can tell you its not easy because the FSA was set up to protect the consumer and quite frankly doesn't give a monkeys about the business.

I know of several people who have fallen on the FSA sword due to complaints made against them for bad debt collection practices etc and i'm not talking about sending in the heavies. One colleague had to reimburse a customer nearly £3k. Why?? Well the customer bought some goods on weekly contract over 3 years, made 14 months of payments via DD. He then complained that the signature was not his and the FSA upheld his complaint and fined the business. He had to reimburse all the DD payments, plus the interest. and the customer got to keep the goods.

 

[Mark T Jones]

Ok thanks Mark, I didn't want to just jump in so I have been collecting on a 125 customer round for just over 5 months, what else can I do ? Do you have any suggestions please ?

Firstly, you need to research relevant legislation on debt collection. It is some time since I have done this, I think it is mostly covered by the Consumer Credit Act, but other legislation may also apply. Your current employer has probably already given some guidance on this and might be able to point you to what legislation they are following

Second, you need to create a robust and legally compliant collections procedure (and risk assessment) - which the FCA will require as part of their authorisation process. (The FCA are particularly concerned about payday & doorstep lenders at the moment)

Then you need to re evaluate your cash/profit projections to ensure you have budgeted sensibly for default, bad debt and costs related to recovery

It is risky to categorise, but the key scenarios you are likely to encounter are

• Customer never had any intention of paying and will whatever means necessary to stop you from chasing them (A very messy minority)
• Customer might pay, but will take pub advice on how to avoid it if possible. A quick trip to the insolvency forum will show how slippery & devious people become when they see a way out of paying their debts.
• Customer wants to pay but is utterly, catastrophically disorganised and will generally put beer and fags higher on the agenda than meeting their commitments.
• Customer has always paid, wants to pay but a change in circumstances has left them unable to do so.