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The Credit Services Association (CSA)
Blog: Financial Capability Week 2016 #FinCapWeek: One small step consumers can take to avoid unknown debts
Claire Aynsley is Head of Regulatory Compliance and Standards at the Credit Services Association. This blog on what consumers can do to avoid unknown debts has also been published on the Financial Capability Strategy for the UK website as a guest blog for Financial Capability Week #FinCapWeek, which is taking place during 14-20 November 2016.
With 40% of adults saying that they are not in control of their finances, financial capability couldn’t be higher on the agenda in 2016. We therefore welcome the Money Advice Service’s launch of the first ever Financial Capability Week #FinCapWeek, which is taking place this month (14-20 November 2016) to bring organisations together to discuss what we can do to make positive change.
As the UK trade association for the debt collection sector, the Credit Services Association’s vision is to build confidence in the debt collection and debt purchase industry amongst our member companies and the customers they deal with on a daily basis, in order to ensure that outstanding balances can be resolved for the mutual benefit of all parties. It is fair to say that, in the past, the relationship between debt collection agencies and customers has been a turbulent one. However, in recent years, both regulatory reform and increased investment in customer service and research into customer behaviours, has greatly improved things. But there is still a long way to go on both the industry’s and, just as importantly, the customer’s part.
How do you avoid debt that you’re not even aware of?
Financial capability is of great relevance to us as an industry. The reason a customer can get into debt is often down to a lack of ability to manage their finances. However, it is also often the case that an account is placed with a debt collection agency not because the customer is unwilling or unable to pay, but because they are unaware of the outstanding balance. This was raised in a Daily Mail article regarding supposed abuse of CCJs by debt collection agencies passing judgments without a customer’s knowledge. We responded to this by highlighting that litigation is always a last resort (after numerous attempts at establishing a dialogue).
Hence we want to raise awareness of the fact that a key part of financial capability is not just managing your finances effectively, but also being proactive in ensuring that you keep your creditors informed when it comes to a customer’s circumstances and what you think is owed.
Ignorance isn’t bliss
Customers being in debt that they are unaware of is frequently due to the fact that the original creditor has been unable to contact them. Data protection and various regulatory activity has resulted in debt collection agencies spending a large amount of time locating customers in order to come to a mutually beneficial resolution. We recently launched a new ‘Trace Code of Conduct’ to raise standards in this area as tracing activity will always be necessary if customer details are not kept up to date or correspondence is ignored.
Unfortunately, in a large amount of cases, consumer forums recommend ignoring letters from debt collection agencies and encourage customers to avoid making contact to find a resolution– whether you believe the debt to be yours or not. We have worked hard to communicate the fact that it is never in debt collection agencies’ interests to try and chase payment from someone who is either unable to pay or who is a case of mistaken identity or mistrace. It therefore is not in anyone’s interests to ignore the unresolved issue.
A customer’s responsibility
One very simple step a customer can take is to always keep creditors up to date on current contact details. If you move home, change phone number, change email address, change your name, or even your personal circumstances change, it is vital that you inform all of the service providers you’ve had accounts with over the years, including the Local Authorities you’ve lived under. A question was raised at our UK Credit & Collections Conference (#ukccc) in September 2016 about why creditors/collectors find it so hard to contact past customers and why email addresses were not being captured to help with this. This is partly down to organisational processes and systems and partly down to what permissions a company has for data to be shared. It is also down to the fact that there are still so many customers (particularly those that are vulnerable to financial difficulty) that don’t have access to the internet or that don’t check or respond to emails. It’s therefore still vital that address details are kept updated.
Communication is key
In the debt collection sector, we are working hard to open up lines of transparent communication between creditors, collectors and customers – and involve the money and debt advice sectors where necessary. We are committed to taking a compassionate approach to understanding customers’ personal circumstances and ensuring that they do not get into further financial difficulty as a result of repaying outstanding debts. We’re also acutely aware of issues around mental health and vulnerability and recognise that there is a barrier to full disclosure in some circumstances. However, whilst we ensure that our members play their part, it is important that customers do too. The onus must also be upon customers to understand that, in such a heavily regulated environment, they have everything to gain and nothing to lose by engaging with and responding to debt collection agencies, most of which are now FCA authorised, to ensure that any outstanding balances are dealt with, or incidents of mistrace are communicated as soon as possible.
You can find out more about Financial Capability Week and the strategy behind it at www.fincap.org.uk and by following @fincapstrategy on Twitter. During the week, we and others will be using the hashtag #FinCapWeek in our tweets about financial capability to help raise awareness of this important issue.