Wright Hassall joins growing list of law firms engaged
in collections. Antonio Fabrizio reports.
Go deeper with GlobalData
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.
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By GlobalDataEarlier 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.”
‘Absolute trust’
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.
Highly-trained team
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.”
Network essential
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?
