The Changing Face of Collections

Clare HollisCollecting debt isn’t a new problem, nor is it one that has been solved – the question is, do we need a clearer more mature approach to collections? 

At least 1.5 million new people struggled with debt in the year to March 2015, according to the Citizens Advice Bureau. In addition, 2,000 consumer County Court Judgments are issued every day, indicating the court’s findings that arrangements have gone unpaid. A recent report by The Money Charity also spelled out the challenges for lenders; which found UK banks and building societies wrote off an incredible £2.95 billion of loans to individuals in the 12 months to July 2015.

Improving collections practices is therefore in the interests of consumers and lenders alike and should go some way to reduce the number of write-offs that take place every working day.

Compassionate collections

The Financial Conduct Authority’s handbook maintains that consumers in arrears must be treated fairly and proportionately, and the vulnerable protected, so it is more important than ever to ensure that your collections activity is compassionate. Adopting a one-size-fits-all approach to collections is inherently problematic. Compassionate collections are characterised by listening closely to each customer’s individual situation and tailoring solutions accordingly.

Bear in mind how often it is the case that the customer wants to pay you back, but is hard-pressed to do so according to the original terms. Perhaps a close relative has recently passed away, or maybe their employment status has unexpectedly changed which has left them in difficulty and without immediately available funds. Avoid short-sightedness and, where possible, adopt a long-term strategy that allows you to work with the customer to agree to a workable repayment proposal. It’s one way to build loyalty, and shows that your company cares about its customers and treats them with the sensitivity that is called for when loans need to be repaid in difficult circumstances.

Educating customers

Education plays a key role in managing customer expectations. We all know what it’s like when we’ve just bought a new car or item for the home – we’re excited and focused on the purchase. It may be less exciting, but at the point of application it is important to understand our limits and what a manageable level of borrowing looks like. Maintain education and communication right through the process so that your customers understand what to do and know to communicate any difficulties as soon as they occur.

Have all of the facts

Your own collections activities are more effective when you have facts about your customers’ circumstances, allowing you to implement a tailored solution. As a base, you need to be able to understand the extent of your customers’ indebtedness and their income and expenditure levels. This paves the way for you to offer bespoke solutions that work for both you and your customers.

With hundreds of thousands of people turning to Citizens Advice for debt help each year, and nearly three-quarters of those reporting their debt issues to be impinging on their peace of mind, good collections practices are an opportunity to combine sensible business with compassion – and it’s easier to be compassionate when you’re well informed.

For more information, please contact us at consumerinformation@uk.experian.com