Burden of responsibility for debt solutions must shift – comments

“As the furlough scheme comes to an end in October, and creditors move from providing widespread forbearance to more tailored support, it’s essential creditors maximise the use of available data, and employ flexible, proactive communications strategies to drive better consumer outcomes. Supporting consumers in financial difficulty is at the top of the FCA’s agenda. Its draft guidance* published earlier this month stipulates firms must recognise individual circumstances and be flexible in their approach to minimise stress and anxiety at this extraordinary time.

“To do this creditors must take a proactive approach to monitor recent account activity, review credit file changes to look for signs of financial difficulty, and then be ready to act when they identify a potential problem. Many customers quite rightly presume companies already have access to data, for which they have provided consent, and customers therefore expect this data to be used to identify likely changes in their circumstances. And when a customer initiates contact themselves, they will expect a company to be able to support their needs and agree the best course of action.

“The COVID-19 pandemic has shone a light on people’s finances like never before. Some consumers are confronting challenges repaying their debt for the first time, while for others it may be a recurring struggle. The burden of responsibility is still largely left on the consumer to identify their own difficulties and then ask for help, when in all likelihood their vulnerability may well cause them to do the opposite. The onus needs to switch to the creditor to identify potential issues much earlier and then to proactively offer and provide empathetic support.

“People in financial difficulty are often scared, unwilling or unable to seek the help they need. Many of these customers will likely be in arrears with other credit providers, as the credit file will often show, and this must be taken into account in the design of the collections treatment path and response. Creditors shouldn’t ignore this and behave in a way that appears to suggest they seek to ‘get paid first’. It’s more important than ever that the tone of any communications is empathetic and not perceived as threatening. Regulators and society expect creditors to treat their customers fairly, and now is the time for them to go the extra mile to identify, assess and then help their most indebted customers through the difficult period ahead.”

Carlos Osorio, Director of UK Debt Recovery at TDX Group, an Equifax company