CRM helps firms obey credit law

IT directors at banks and retailers must ensure they are compliant with lending laws

Experts have warned that IT directors at banks, building societies and retailers must act now if they are to ensure their customer relationship management (CRM) systems are fully compliant with new rules for consumer lending that are expected to become law next year.

The Consumer Credit Bill received its second reading in the Lords in October and is anticipated to become law in the first quarter of 2006. Under the new law, lenders will have to give consumers more in-depth information about their credit accounts.
Consumers will also have more rights to challenge unfair lenders, and the Office of Fair Trading will gain more power to fine firms that breach the rules. Andy Cutler of CRM software vendor Chordiant said the new law would require lenders to more closely monitor customers' circumstances; introduce consistent processes for collecting arrears and communicating with customers; and ensure consumers are aware of the consequences if they default.

He added that by using CRM systems to automate processes, firms can generate an audit trail to prove compliance with regulations. "Systems that make customer records available to customer service agents and then work out appropriate action, based on analytical tools, ensure that processes are compliant," he said.

Mike Davis of analyst Butler Group said many lenders already have the necessary CRM systems to ensure compliance, but will have to change processes to ensure information is better communicated to customers. He added that if firms change their processes early they could gain a competitive advantage.