CSA urges Minister for Financial Inclusion to promote early engagement in combating problem debt

CSA figures show more than 750,000 customers received additional forbearance during 2020.

Lesson from COVID is that engagement with creditors can prevent worsening debt woes.

The Government and the Money Advice and Pension Service (MaPS) are being urged to promote early engagement between customers and creditors as the most effective route to resolving problem debt.

Not only can early engagement prevent a customer from falling into serious debt in the first place, but it will also support the debt advice sector in being able to target its activities towards those who really need it.

This is the advice contained in a letter sent by Chris Leslie, the Chief Executive of the Credit Services Association (CSA), to Guy Opperman at the Department for Work and Pensions.

In it, Mr Leslie proposes that MaPS should consider embedding early engagement into its strategy for money guidance as ‘the best first step to resolving problems’.

“If a borrower talks to a creditor or a debt collections agency (DCA) acting on their behalf, it is highly likely that an affordable repayment plan can be arranged, tailored to an assessment of an individual’s income and expenditure and the issue resolved to mutual satisfaction,” he says.

“But if that conversation is delayed, does not occur, or efforts to make contact are ignored or pushed aside, then those seeking to collect on sums owed will be unaware of that person’s circumstances - and that individual’s stress and concern could well continue for longer than might need to be the case. Sharing the issues between all parties is most often the best route to resolution.”

The CSA’s Chief Executive has urged Ministers to improve messages about early engagement in the MaPS money guidance strategy and to consider discussing this at their next meeting of the Government’s Financial Inclusion Policy Forum.

He says that the Government already acknowledges the best practice evidenced by the private sector in collecting debt and should now help to change the narrative about what happens when a borrower falls into arrears.

“As a trade body we have worked hard to dispel the misconceptions around collections and to reassure customers – but our ability to influence financial education and public information is limited. That is why we would like to work in partnership with the Government, MaPS, the FCA and other public bodies to promote the benefits of ‘early engagement’ to the wider public on a larger scale.”

In 2020, according to CSA figures recorded in its Data Gathering Initiative, more than three-quarters of a million borrowers (773,579) received additional covid-related forbearance from DCAs, over and above the forbearance and payment rescheduling such agencies would already provide borrowers, as the sector responded to the needs of customers during the pandemic.

“Conversations between customers and lenders made a big difference in 2020,” Chris continues, “and this could be a positive learning from the pandemic.”

“We fully support the work of MaPS in promoting free independent debt advice and debt awareness but believe that many borrowers could also prevent difficulties worsening if they engage in dialogue with creditors and our members at an earlier stage to discuss repayment plans and affordability.”

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