Metrics Monthly | September 2019 | UK Edition

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Metrics M onthly

UK EDITION September 2019

In this issue TIME FOR CHANGE PPI claims companies are looking for a new target

In this issue Welcome Page 03

Three new appointments Page 04

In the news Page 05

Time for change Page 06

We’ve scored a hat-trick! Page 08

Product streams Page 10

FREE credit risk workshop Page 11

Case study Page 12

The SCOR dilemma Page 14

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September 2019 | UK Edition

Welcome

September marks the changing of the seasons, and we’re wondering if it’s time for claims companies to change too. In this issue, LendingMetrics founder David Wylie wonders what income streams the claims management com- panies will go after next, now that the deadline for PPI claims has passed, in our headline piece ‘Time for Change’. That’s not the only change that’s hap- pened recently - in this news this month was an interesting shift in the way con- sumers spend their money. Read more about the debate this has sparked in our article here. This month we’re also welcoming three new staff members to the team, and reflecting on the growth we’ve seen at LendingMetrics this year.

Last issue we asked ‘will the winning streak continue?’ at the Credit and Col- lections Technology Awards, and this issue we’re proud to say it has! Find out howwe scored a hat-trick at the awards, as well as the additional commendation we received in our article here. Our latest #10ThingsAboutADP video looks at the different product streams available in the lending market, and how our award-winning Auto Decision Plat- form (ADP) integrates with them. With gambling a large target on the UK Government’s regulatory radar, we’re arguing that the existing SCOR restric- tions are allowing gambling companies to sidestep creditworthiness checks. Our article titled ‘The SCOR Dilemma’ discusses this problem, along with what the possible solutions may be. As always, if you enjoy reading this issue of Metrics Monthly, you can sub- scribe to it via our website here.

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+44 (0) 2394 211010 | www.lendingmetrics.com

Metrics Monthly | 03

Three new appointments

LendingMetrics welcomes Michele, Robert and David to the team In 2019 LendingMetrics has already seen huge growth and, as a result, we have increased our headcount of employees almost every month. are excited about what the future holds for our award-winning Auto Decision Platform.

We have also had two great Developers join the team: Robert Olah and David Wright. The UK LendingMetrics team previously welcomed Robert and David, ahead of their starting, at the summer event last month, which saw the team take to the bowling lanes followed by celebrating a successful first half of the year with exotic food and cocktails. Robert has joined the ADP team as a Senior Developer, which will allow us to put more resource in to our already successful R&D. ADP has many new features being developed for release in 2019 and 2020, and with two more recent award wins for innovation, we

David Wright has joined as a Junior Developer within our Operations team. David will initially be supporting all of our platforms, before moving across to strengthen our ADP team even further. We hope Michele, Robert and David settle in well and enjoy being part of our ever-growing team. Click on the profiles below to find out more about and connect with our new team members on Linkedin.

This month has been no exception and we are excited to announce the follow- ing new additions to the UK team. Michele Pothecary, has joined our Sales department as Sales Operations Manager. Michele joined LendingMet- rics, leaving her previous role after 10 years of service. Michele will be sup- porting the sales function, helping to coordinate the team alongside our Part- nership Manager.

Sales Operations Manager Michele Pothecary

Senior Developer Robert Olah

Junior Developer David Wright

Above: The LendingMetrics team at Hollywood Bowl and Las Iguanas in Portsmouth at last month’s event

04 | Metrics Monthly

September 2019 | UK Edition

In the news Credit card spending overtakes cash

Cake and coffee The last Friday of September marked the annual Macmillan Coffee Fund- raiser event, hosted by Arena Business Centres, who manage our UK office at Lancaster Court.

According to the British Retail Con- sortium (BRC) Payments Survey, consumers are now spending more money on credit cards with UK retailers than they did with cash. The survey showed that, whilst debit cards were still the most popular way to pay with £216bn spent last year, credit cards have now overtak- en cash for the first time. Credit and charge cards account- ed to £82bn of retail sales last year, overtaking cash, which saw £78bn worth of spending. Whilst cash is being used more fre- quently, the amount spent using credit cards was higher than cash. This revelation leads to conversa- tions about the move to a complete- ly cashless society. According to Andrew Cregan, policy adviser for the

BRC, a cashless society would cause problems for millions of people. Cregan notes that, without cash, it would be harder to leave tips or give money to homeless people. In addi- tion, those who find it harder to use digital services or who use cash as a lifeline when in abusive relationships would be severely effected. The BRC also shows concerns for retailers due to the rising cost of accepting card payments, which could have a significant effect on small and medium businesses. The BRC survey goes alongside a recent claim by consumer group Which?, who said that free-to-use cash machines are disappearing quicker in deprived areas than in affluent ones, leading to more debate about the effects this will have on the economy.

The LendingMetrics team joined in the action for a slice of cake to support the worthy cause. We also got to help judge the ‘Bake Off’ competition entries, and decide which entry would be worth of a Paul Hollywood handshake. The standard of baking was higher than ever, and the team sampled an impressive selection of cakes, brown- ies and cupcakes, whilst also donating to Macmillan Cancer Support, who provide physical, financial and emo- tional support to people diagnosed with cancer and their families.

+44 (0) 2394 211010 | www.lendingmetrics.com

Metrics Monthly | 05

Time for Change PPI claims companies are looking for a new target

Action needs to be taken now to avoid a new mountain of vexatious claims, says David Wylie, Director of LendingMetrics. Many claims management compa- nies have been casting around for new income streams now that the door has shut on PPI, a market which has been really good to them. Some £39 billion has been handed out to consumers, of which the claims companies have kept up to 30%. Market experts reckon that the full cost of PPI will come in at nearer £50bn - five times the cost of the London Olympics. That’s an income for claims companies of between £10bn and £15bn. Nice work if you can get it. Little wonder that they are casting around for new targets. They want to keep their extremely profitable model going and have huge operations to feed. It has to be said, undoubtedly, that over the years there were an awful lot of gen- uinely mis-sold PPI policies out there. If you were looking to take out a loan in the 1990s and early 2000s, there was a

high probability that a bank would say at some stage in the application process that success was heavily dependent on having PPI. But, equally, there is really no doubt that there have been an escalating propor- tion of claims that were unfounded. Claims management companies have played the system, knowing full well that banks would often not have all the documentation necessary to prove PPI was correctly sold. They also knew that each claim for- warded to the Financial Ombudsman Service would cost the lender a stand- ard £550 fee, plus the considerable manpower cost involved in processing, so lenders were willing to settle, just to get claims off their radar. Lenders often had veritable mountains of claims that had to be turned around in the timeframes set down by the regula- tor. Get behind, and they were looking at even steeper costs. The claims chasers knew this, and the fact that there was no downside for either the claimant or for them.

As Barclays finance director Tushar Morzaria admitted this summer, claims companies had been ‘swamping the bank with vexatious claims’. Well, those that are in any way involved in consumer lending or providing investment products, now need to sit down and take a deep breath. These self-same claims compa- nies that have spent the past 10 years perfecting the art of secur- ing PPI compensation, often on flimsy grounds, are in the process of turning their full attention on you. The 1,500 claims management companies - that sent out 2.7 billion unsolicited calls, texts and emails every year during PPI, the equivalent of 50 per adult per day - are now focusing their efforts towards chasing claims of mis- sold consumer credit.

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September 2019 | UK Edition

Claims companies don’t have far to look, given that the PPI forms they have asked consumers to complete also had sections requesting details of all loans taken out. The modus operandi of claims com- panies mean we can expect the same carpet bombing of daytime TV adverts that there was in PPI, but this time sug- gesting to consumers that they’d be mad not to make a claim against the provider of their consumer loan, credit card, investment, etc. For companies such as those whose lending book consists substantially of smaller loans of under £1,000 this sce- nario could be disastrous. I spoke to a medium-sized unse- cured lender last month who told me that claims were already costing his company £30,000 per month. He had an all too familiar story. Over the space of six months or so, he had been inundat- ed with claims for mis-sold loans, most of which were from claims companies. He was getting cases in batches of 200- or-so from one claims company that was acting in the same manner as pack- agers used to in the mortgage market. Among these cases were claims from individuals who had only been granted a loan the previous week. When contact- ed, they had no knowledge of making a mis-selling claim.

Calls to this particular claims company go nowhere, he says. You cannot speak to anyone who is able to access infor- mation on a specific case, suggesting that much of the claims process is automated and that leads are bought from >Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16

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