Wright Hassall joins growing list of law firms engaged in collections. Antonio Fabrizio reports.
Law firms are responding to increased demand for outsourcing services by investing heavily in collections services.
Leamington Spa-based law firm Wright Hassall is about to launch a full collections and recoveries service for motor, asset and property finance clients.
Wright Hassall joins a growing list of law firms engaged in collections activity, including HBJ Gateley Wareing in Scotland, national law firm Irwin Mitchell and Sussex-based Thomas Eggar.
Earlier this year, Wright Hassall hired Gill Payne as head of client portfolio management and collection solutions. Payne reports to Sarah Perry – who heads up the Wright Hassall’s lender solutions team, with 37 staff under her.
Before joining Wright Hassall, Payne – who has over 30 years’ experience in collections – worked at Shoosmiths, which has operated a collections business in the asset and motor finance sectors for the past five years.
Alongside Payne, three others have joined Wright Hassall from Shoosmiths: Steven Slatter has joined as a solicitor; and Danielle Payne and Nicole Jackson have taken up roles as account collectors.
Ramping up business
Shoosmiths, meanwhile, is ramping up its existing collections business. It has tasked recent appointment Kevin Parker with running the department, alongside Joanne Davis and Roger Potgieter, the law firm’s partners for asset finance and motor finance respectively.
Parker has 26 years of collections experience, which includes acting for the captive arms of Peugeot and Citroen, and will have 40 staff reporting to him.
A further 25 staff at the firm’s litigation department, all of whom report to Davis and Potgieter, are also available to assist Parker’s collections activity.
Shoosmiths and Wright Hassall say they have developed business models that enable leasing companies to outsource their entire collection activities to the law firms, transforming them, in effect, into external arms of leasing companies.
Also, according to Parker, much of the outsourcing process depends on what the leasing company and the law firm have agreed to in advance.
“If a lessor wants to outsource an element of their collection activity to Shoosmiths, we take a holistic approach,” he said. “They would sit down with us in advance, and specify the kind of process outline that they would like to see.”
A number of lessors leave it to a law firm’s experience to take that element forward and develop it, Parker added. For that reason, a key element of the relationship is the “absolute trust the lessor puts in us”, he says.
“For some clients, we would act in their name for the first part of any collection cycle,” he said. “Then, of course, we would change it to our own name at an agreed point to highlight the urgency of the matter.”
From Wright Hassall’s perspective, the firm would “prioritise according to the client instructions, size of debt and exposure”, although it is “usual practice to concentrate on the 100 highest balances”, said Payne.
Commenting on the reasons why law firms are well suited to outsourced collections activity, Payne pointed to their proven track record in reducing arrears and internal fixed costs, their fully trained and competent account managers, and their ability to take on large volumes of cases at very short notice.
“We can act as an invisible partner or as a firm of solicitors,” she added. “In a way it has got to be a lessor’s dream, because they do not have to be worrying on the changes in regulations – that is what we are really good at, being ahead of the game.”
For Parker, if a lender chooses to outsource the management of their portfolios, “they are taking the view that their primary business is lending money on an asset-based or motor-based portfolio, as that’s what they are experienced in”.
Shoosmiths – which said it is constantly being invited to tender by asset and motor finance companies – has often found lessors’ back-office old-fashioned, and “with no real investment in technology”.
Parker’s colleague Potgieter added that behind Shoosmiths’ expertise there lies the ability to “offer specialism”.
Potgieter has specialist knowledge of motor finance and regulated agreements (having worked in the sector for 12 years, including GMAC), while Davis has specialist knowledge of asset finance with more than 14 years’ experience (including RBS and Lombard).
Just like lessors, a key issue law firms face is handling customers who fail to pay.
According to Payne, her collections team would launch an ‘escalation strategy’ which first starts with a letter and a telephone call to the client. If less than one-third of money owed is outstanding, Payne added, her team would refer the matter to a repossession agent. If more than one-third is owed then her team would launch litigation.
She added: “If we are unable to obtain settlement, then we look to agree a sensible monthly arrangement. The collections team is highly trained in making commercial decisions as to whether it is cost-effective to sue or not.”
The worst-case scenario – a company going into insolvency – means the law firm is already there to act as quickly as possible to recover the assets.
Recently, Shoosmiths was able to recover the vehicles of a large motor lender from a dealership that had just collapsed.
By acting promptly, Parker explained, Shoosmiths was able to recover all the vehicles and sell them quickly, having agreed with an auction house to be open at the weekend.
He added: “The vehicles were disposed of and the account was dealt with, whereas we know of another lender involved which still hasn’t recovered its vehicles. This shows we can add real benefit to this type of process.”
Davis added: “Recovering a car is massively different from recovering a piece of construction equipment. There are so many different ‘nuisances’ you have to be aware of.”
For instance, Shoosmiths deals with a number of construction finance firms for which it provides a “one-stop shop European support service”. It also has a specialist marine recovery team focusing on yachts.
The law firm’s involvement can become particularly important in fraud cases, especially if the asset goes missing or is in another jurisdiction – a situation where international connections might come in handy.
Wright Hassall has got contacts across Europe, and uses a firm of repossession agents operating in Italy and Spain. It also has contacts outside Europe, including in Canada and Australia, which allow it to “track most things”, said Payne.
Shoosmiths, on the other hand, has recently dealt with a fraud case against a captive – where fraudsters had taken six high-value vehicles out of the UK.
The captive’s fraud team was able to track the assets though Germany into Northern Cyprus where Shoosmiths’ legal intervention enabled its client to gain an injunction preventing Northern Cyprus port authorities from releasing the vehicles to fraudsters.
“The way we do that is through a network of legal connections throughout the world,” said Potgieter, who followed the case.
“We don’t have offices in Cyprus, but we are able to liaise with lawyers over there to get the necessary processes in that jurisdiction under way to protect our client while the case is ongoing.”
Parker added that this network has proved essential in situations where identifying the asset is more challenging.
“While vehicle identification is quite straightforward due to chassis numbers, it is more difficult with non-motor assets such as construction equipment,” he said.
Dealing with repossession agents is another area where law firms might be more experienced than leasing companies, Payne said.
But, she warns: “As you need to get to know your customer, you really need to get to know your agents, and there has got to be a huge amount of trust. They are representing you and your client, so anything wrong, has repercussions on that.”
All these reasons might well support a viable collections model for the future of many lessors. Now the question is: will leasing companies adopt it?