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The Credit Services Association (CSA)
Blog: Autumn Statement 2016: How can the debt collection sector prepare for anticipated increase in debt problems for the ‘just about managing’ in 2017?
Peter Wallwork is chief executive of the Credit Services Association, the UK trade body for the debt collection sector.
Despite attempts to support those that are ‘just about managing’ (JAMs), the Money Advice Trust’s Joanna Elson is predicting a “significant increase in debt problems in the year ahead” as a result of higher inflation and lower wage growth confirmed in the Chancellor’s Autumn Statement 2016.
The day after the recent Autumn Statement was published, I attended the Money Advice Liaison Group’s (MALG) annual conference which asked whether we are REALLY “all in it together” when it comes to tackling problem debt. As was highlighted during the sessions throughout the day, it is now more important than ever that money advisers, creditors and collections professionals work together to streamline the customer journey so that we can address and prevent what Gareth McNab, Money Advice Liaison Manager at Nationwide, called “debt related harm” (rather than “problem debt”).
In the debt collection sector, we have made significant progress this year in applying a ‘customer-outcomes’ culture to our practice and forging links with both the money advice sector and creditors (through our creditor membership and creditor forums). We have moved from dealing with “debtors” to dealing with “customers” and a widespread recognition that we are simply dealing with “people” who each have a unique set of circumstances.
With debt problems set to increase in 2017, we need to move debates around things like vulnerability forward so that instead of labelling customers as ‘vulnerable’, we are recognising that anyone can become vulnerable at any time and that vulnerability isn’t necessarily a label that helps consumers get out of problem debt.
Improving financial capability
In December we got involved in Financial Capability Week #FinCapWeek to provide practical advice on what consumers can do to avoid unknown debts and also to look at how we can identify and address financial difficulty amongst young people before it becomes the ‘habit of a lifetime’. Many would argue that there isn’t a business case for debt collection agencies helping people to avoid spiralling debt problems but we are committed as a sector to raising standards in customer service, not just to comply with consumer credit regulation, but because good customer relationships and good customer outcomes are at the heart of sustainable business. The better we understand our customers’ circumstances, the more easily we can help them and find a mutually beneficial resolution. It is not in ours or anyone’s interests to try and collect debts from people who are unable to afford to repay them.
Signposting both ways
As the people that have direct contact with those in debt, debt collection professionals have a duty of care to support customers and find the right resolution for them so that their debt problems don’t spiral out of control. We know that many people wait 18 months too long before seeking debt advice, despite it being freely available, and that those with mental health or other personal issues may be reluctant to disclose them. We therefore have an opportunity to signpost those that have fallen into arrears to get help. However, creditors can also do more to communicate the transition of an account to a debt collection agency and the money advice sector can also do more to educate customers on why it is so important to not ignore correspondence from debt collection agencies in order to increase trust and transparency and ensure that debt problems don’t build up.
We believe that we now have a greater understanding of the issues facing those in financial difficulty than we ever have before and that using this insight, we can support our Members and their customers through what will be a challenging time in the coming years.