Blog: A brighter future for debt collection in the mobile phones sector?
A qualified solicitor, Sara de Tute has over 10 years’ experience as a Legal & Compliance Director within the debt collection sector. She is a Member and former President of the Credit Services Association’s Board of Directors.
Last month (January 2016), Citizens Advice published a report called ‘Falling Behind: an assessment of debt collection practices in the mobile phone market’. It referred to ‘cumbersome, inadequate debt collection processes which act as a barrier to attempts by customers and their advisers to resolve debt problems’ including issues with poor communication and dispute handling. There are now calls by Citizens Advice for action to be taken to improve practices in-line with other sectors such as water and energy, where big improvements have been made in recent years.
Why are mobile phone networks/providers ‘falling behind’ when it comes to debt collection?
The mobile phones market is different to more heavily regulated sectors such as utilities and financial services, not just because it doesn’t have to comply with such strict regulation, but because historically its customers who have outstanding debts have been of a different demographic to those with debts in other sectors. It wasn’t very long ago that mobile phones were a luxury item rather than a necessity and those at risk of having their mobile phone connection cut off are by nature generally less vulnerable than those at risk of having their energy cut off.
Mobile phone customers of the past were also typically younger and not often struggling with other debts such as Council Tax. The reason for defaulting on mobile phone payments may often be due to wanting a new handset or contract before the end of the term, rather than financial difficulty. This is evident in the fact that only 14% of mobile phone debt is not paid, which is low in comparison to other sectors.
However, with the rising price of handsets, providers making contracts longer and people becoming more reliant on their mobiles, things are changing which has brought debt collection practices into focus.
I don’t think anyone would argue that an individual should be treated fairly regardless of the type of debt they have and there should be just as much emphasis on affordability and customer treatment when collecting mobile phone debt as there is in any other sector. Many have already taken significant steps forward to provide customers with more protection with measures such as splitting out contracts for mobile phones and tariffs and clearer information on tariffs and contract termination. There is always room for improvement and most within the industry recognise and welcome this. As we have seen in other sectors, it is always better to start working towards improved self-regulation before stricter regulation is inevitably imposed.
Should mobile phone customers be treated the same as utilities and financial services customers?
Many people who are entering into a mobile phone contract don’t think about the fact that they’re entering into credit – they tend to focus on the phone rather than the credit agreement. It’s therefore important that contract terms and additional charges are made really clear from the outset. However, there has to be some responsibility from consumers themselves. Some examples within the new report from Citizens Advice highlight customers struggling with extra charges when, for example, they are abroad and have been made aware of this via text messages.
Understanding what the add-ons and penalties are for coming out of a contract is important and mobile phone providers/networks may want to look at the length of contracts given the fact that consumers tend to want new handsets every year.
The reality is that, regulated or not, companies don’t set out to treat customers unfairly and mobile phone providers are no different. There is always a learning curve when it comes to debt collection and the mobile phones sector could work more closely with organisations like the Credit Services Association and utilities sector trade bodies and benefit from their experience. By treating all customers consistently from the outset, standards will be raised across the whole collection industry.
What can the debt collection sector do to help mobile phone companies improve practices?
Most debt collection agencies are now or soon will be authorised by the Financial Conduct Authority (FCA), and this has brought an increased focus on fair customer outcomes and the highest possible standards of customer service. We need to ensure that this focus is not just on customers with consumer credit regulated debts but that customers from all sectors (including mobile and government) are treated in a consistent way. We can achieve this by more liaison across the sectors to share best practice.
When an account is disputed by a customer, we as debt collection agencies must ensure we have the right processes in place to investigate this in the right way and that we are satisfied with the response we are getting back from the mobile phone provider in the way we would or any other client. If not, we should go back for a further clarification (and this is not unique to the mobile sector). We should also liaise with them about dispute trends and root cause – we could even offer recommendations for improvements. If we just ignore poor responses, it doesn’t help anyone.
A customer with a defaulted account should expect to be treated fairly and consistently as part of the customer journey and we can work with clients to understand how the customers is dealt with during the selling and retention process, not just when they default on payments.
This report comes at a good time for the industry and I’m confident that the work that has already been done and is being done to improve practices will continue for the benefit of everyone involved.