The full picture
Increasing visibility of useful customer data

Published 10 October 2022

It’s those two words again, isn’t it? Consumer Duty. Such innocuous sounding words, and ones that should feel like the natural thing to do for so many organisations and companies out there. But what do those words actually mean, and, crucially, how are they being interpreted? The premise is simple enough. There are three key elements; the Consumer Principle; Specific Behaviours; and Outcomes. The Consumer Principle aims to improve overall standards of behaviour; Specific Behaviours means that firms need to show they take all reasonable steps to avoid foreseeable harm to customers; and Outcomes means that firms need to ensure their customers receive fair value and fair products, that they understand how to use their products or services and receive support. So far, so straightforward. The worlds of financial services and customer service have made significant strides since the days of ‘the customer is always wrong’. So what’s the challenge? Firms need to consider how best they might demonstrate all of the new requirements, against a background of increasing economic turmoil and distress. Inflation is high. Food, petrol and energy bills are seeing price rises at rates that feel unprecedented to the younger generation. Over 4.5 million households are already struggling, demand for credit is rising, as is the level of support needed. Regulators will be looking closely at the world of consumer credit, and industry application of Consumer Duty. HOW DOES REGISTRY TRUST FIT IN? Registry Trust are neither a regulator, nor a regulated firm. So why should we care about Consumer Duty? Registry Trust run the Register of Judgments, Orders and Fines, which from an organisation’s point of view means that any kind of financial dispute you have with a consumer may well end up being represented on our public Register. We hold records on all county court judgments (CCJs), (decrees in Scotland) stretching back over the last five or six years, depending on the type of record. Registry Trust occupies an impartial place in the world of consumer credit and CCJs. We don’t pass judgment on the merits of any CCJ, we simply make sure it is recorded accurately. The link with Consumer Duty obligations and requirements is in our three main campaigns on Get Satisfaction, Partial Settlements and Claimant Data. Get Satisfaction calls for regulated firms to have the recording of satisfied or fully paid judgments sent through to the courts (and then to Registry Trust) in the same way that firms take out the original judgment. The mechanism for doing so already exists, and does not require structural change for firms, or legislative change for government. What it would do is give firms a way to demonstrate that they were acting in the interests of customers by ensuring they had their records updated when a debt was fully repaid or satisfied. Partial Settlements are not reflected in borrowing history or credit ratings. If a consumer and a firm come to a financial agreement, the consumer receives no public acknowledgement of the agreement, and therefore limited …

Up in the air
When is it appropriate to lend to those with CCJs?

Published 10 October 2022

Earlier in the magazine we asked Lex Jones of the Registry Trust to talk a little more about the importance of the work that they do on county court judgments (CCJs). The CCTA is a strong supporter of their Get Satisfaction campaign to ensure that the judgments are kept up to date. When CCJs are satisfied it is important that there is a record. This should be win win for both the customer and lenders. The guidance around the Consumer Duty makes clear that a lender is looking to deliver the best outcome for a customer when they make sure information is passed along about a CCJ. Looking into the future, the sign that a customer has corrected their position, that they have taken steps to put things right is surely an indication that they may be a suitable customer in the future. From a behavioural perspective, in terms of credit risk, a lender might view favourably someone that has not just let time run down on their CCJ. However, this is only relevant if the regulator doesn’t close lending to those with CCJs. This was one of the issues that emerged from industry discussion earlier in the year. It became a concern that the FCA were questioning if it was right to lend to people that had CCJs. While this was an issue that emerged from informal conversation amongst members, we said at the time that we would pursue this further with the FCA. For us, the concern was that this looked like a misunderstanding of the nature of the market that many high-cost lenders serve. Our view has always been that, especially in sub-prime, customers may well have had a CCJ. In a statement that we were told we could share with the membership we were assured that the FCA’s position is not that you cannot lend to a customer with a CCJ. They said to us, “A firm should have regard to any information of which it is aware of at the time the creditworthiness assessment is carried out that may indicate that the customer is in, has recently experienced, or is likely to experience, financial difficulties. The fact that a customer has a CCJ is likely to be relevant to this assessment.” Hopefully that provides some assurance that there is no outright ban. They went on, “The extent and scope of the creditworthiness assessment, and the steps that the firm must take to satisfy the requirement that the assessment is a reasonable one, based on sufficient information, are dependent upon, and proportionate to, the individual circumstances of each case. The presence of a CCJ may be a factor suggesting that a more rigorous affordability assessment is necessary.” Now the quicker amongst you may realise that this is also not an endorsement of this lending. There is enough in that explanation, with a mention of proportionality, that supervisors could use to close this down while not imposing a full stop. There is also a deeper question as …

Building a framework
Evidencing outcomes in a Consumer Duty world

Published 10 October 2022

The FCA’s new Consumer Duty is a vital aspect of the current regulatory regime. This is a significant regulatory intervention aimed at raising standards. The proposed new principle – ‘A firm must act to deliver good outcomes for retail customers’ and the associated cross-cutting rules represent a clear shift in approach and a significant raising of the bar across the product lifecycle. Where good conduct was once demonstrated primarily through adherence to policies, processes, and rules, the FCA is itself focussing more on outcomes and expects firms to do the same. Rules-based compliance, in isolation, has given way to an outcomes-based approach with the FCA expecting firms, and their boards and senior executives to assess and monitor the outcomes customers receive. A way for firms to evidence against this requirement is to undertake customer-focused outcomes testing. WHAT IS OUTCOMES TESTING? Apart from ‘outcomes’ being the new buzzword (it is used 152 times in the FCA’s final guidance), outcomes testing is still quite a nebulous concept. So what is it? At Square 4, we view outcomes testing as a holistic review of a customer’s journey, to determine whether, based on their individual circumstances, customers received a good outcome. Typically we’ve found a level of direct customer engagement to be most effective. The articulation of the desired outcome should be defined by the firm for each component part of the customer journey, taking into consideration FCA requirements, its defined standards in relation to customer interactions aligned to its customer experience agenda, and its defined risk appetite. It is useful in the design of the outcomes testing methodology to consider regulatory expectations regarding the conduct of business and treatment of customers. However, it is imperative that outcomes testing is more than just a detailed assessment against the FCA rulebook. Upon reaching a consensus on a defined standard, firms should consider the KPIs and tolerances that are acceptable and how they are then going to measure the outcomes. Measuring outcomes can take many forms and would include intelligence around; product usage, customer contact, file reviews, MI from distributors and third-party suppliers, feedback from analytics on digital journeys, complaints, business persistency rates etc. Of these, customer contact is critically important, particularly to test the quality of financial promotions, disclosures, and customer understanding. In designing the Outcomes Testing Framework and methodology, we’d encourage firms to think about some of the key drivers behind the Consumer Duty, namely; the irrational nature of consumers, the behavioural biases they display, whether their products are fit for purpose and provide fair value, the level of financial literacy of their target market, and the imbalance of knowledge that exists between firms and consumers. The Consumer Duty requires firms to put consumers at the heart of their business and focus on delivering good outcomes. To do this effectively, firms need to consistently consider the needs of their customers, and how they behave, at every stage of the product/service lifecycle. With ongoing testing in place, this allows firms to continuously learn from their …

Path to success
An update on membership services

Published 10 October 2022

In the last edition of our magazine, I spoke about some exciting plans to further develop our services as a trade association. This edition presents a good opportunity for me to update our members, both long-standing and those that have joined us recently, on those plans. In short, it has been a busy period for the CCTA team but our plans have progressed well. Last time, I spoke about CCTA introducing more workshops and guidance papers on key regulatory topics. As many of you will know, we delivered the first of those workshops in August, covering the Consumer Duty and the key considerations for our members. It was a hugely successful workshop, attended by over 100 members and we received a lot of positive feedback. Following the workshop, we published our Consumer Duty Guidance Paper, which supported and guided our members in not only understanding the Duty but the key implementation and operational considerations. We continued with in-depth discussions around the requirements and expectations of the Duty at our recent Autumn Summit. But our work on Consumer Duty does not stop there. We know it remains a key regulatory topic, not just during the implementation phase, but for years to come. We are now working on delivering the next set of workshops and guidance papers. Before the end of the year, and going into early 2023, we will be covering key topics such as illegal money lending, online and social media financial promotions, commission disclosures, complaint handling and MI in light of the Consumer Duty and Statutory Debt Repayment Plan (SDRP) scheme, to name a few. In fact, members will have seen the recent release of our second guidance paper on the FCA’s improvements to the Appointed Representative (AR) regime. This is a must-read for our members who have, or plan to have, appointed representatives. Similarly, we previously spoke about a review of all our core regulated and non-regulated agreements and statutory documents, which a lot of members use. Considering the Consumer Duty, we have improved readability, layout, and accessibility. Key financial information, as well as terms and conditions are clearer and aid consumer understanding. We are now at the latter stages of final review and approval, and aim to release the new versions towards the end of the year. Concurrently, we are starting discussions with some potential online training platform and software providers. We previously mentioned our intentions to introduce training and CPD for our members. Although our discussions are at very early stages, we intend to launch compliance training as soon as practicable for member firms and their staff. Our plans are to make available training modules that will cover many of the key legal and regulatory topics in our sector. These include (but not limited to) complaints, financial promotions, CONC, the Consumer Credit Act, treating customers fairly, vulnerable customers, anti-money laundering, anti-bribery, the Consumer Duty, whistleblowing, data protection/GDPR and SM&CR. As we approach the end of 2022, here at CCTA we are already planning what 2023 will …

Trimming the fat
Reform of the Consumer Credit Act

Published 10 October 2022

This year marks what could be a major revolution in UK consumer credit law, with HM Treasury (HMT) in June announcing planned reforms to the Consumer Credit Act (CCA). The CCA regulates all credit cards, personal loans and retail asset finance. The Government will move retained provisions in the CCA from statute to sit instead under the framework of the Financial Conduct Authority (FCA). Firms and consumers alike should keep an eye on these developments. For firms, depending on how the regime takes shape, changes will likely be needed to their systems, front and back books, agreements, servicing arrangements and policies. The aims of the reform are to modernise and simplify the CCA. The Government described the existing regime as “highly prescriptive and increasingly cumbersome and inflexible – confusing consumers and adding unnecessary costs to businesses when implementing its requirements”. The stated intention of moving much of the CCA from statute to sit under FCA rules is to: enable the FCA to respond quickly to emerging developments in the consumer credit market, rather than having to amend existing legislation; and simplify ambiguous technical terms to make clear to consumers what protections they have, and make it easier and more cost effective for businesses to comply with regulation. In the spirit of Brexit and the resulting opportunity for UK regulatory reform, the proposed CCA reform is likely to mark a significant philosophical change to the consumer credit regime, rather than the ‘lift and shift’ exercise undertaken when the FCA took over the regulation of the consumer credit market. The Government has made clear that its approach now will be different, with a view to crafting and creating a consumer credit regime that is more outcomes based and “better suited to the needs of the British people”. There are three key themes of the reform, which build on the recommendations of the FCA’s retained provisions report in 2019 and the Woolard Review. These are: 1. INFORMATION REQUIREMENTS HMT will consult on repealing all information requirements that currently sit in the CCA. The FCA will then consult on handbook rules to sit in CONC that will govern the form and content of pre-contract disclosures, agreements and post-contractual notices (similar to the current regime in MCOB). HMT and the FCA are clear that this will not be a ‘lift and shift’ exercise. Instead, this will be an opportunity to review in detail the relevant requirements and consider what information consumers need, and when and how it should be transmitted to them. As echoed in HMT’s June press release, there is a clear desire to move away from tick box regulation to more principles outcomes based requirements, albeit with recognition and acknowledgment that a certain level of prescription will be required (e.g. for total cost of credit assumptions if customers are to be able to compare products across the market). Clearly there will be significant work involved here for the FCA (and ultimately also for firms). Firms are likely to need to review their origination and …

For consideration
Review of Scottish judgment (diligence) enforcement

Published 10 October 2022

The Scottish Government’s ministerial forward to Scotland’s stage two diligence review cites a number of factors for its necessity including the pandemic and cost-of-living crisis. Those with problem debt, including those with mental health issues, need greater support. There are also helpful suggestions to make some of the current enforcement options more effective for creditors. Following the consultation, a stage three review will take place. The proposals include the following: • The current temporary embargo of six months on diligence for those in financial difficulty should be made permanent. A specific mental health process should also be introduced. • Those debtors who want to enter a trust deed should be given an information leaflet explaining its implications. • The “Debt Advice and Information Pack”, which explains the implications of debt and available advice, should be modernised. • The Minimal Asset bankruptcy process stipulates that it will be unavailable if a debtor’s cumulative assets exceed £1,500. This is to be removed as it disqualifies several debtors from being able to benefit from the debt relief which the procedure offers. A debtor is also excluded should assets be greater than £2,000 with a single asset having value of greater than £1,000. It is proposed the single asset provision be removed. • To maintain consistency throughout the UK, the current “Standard Financial Statement“, which is already being used, should be permanently adopted. • No change is suggested to the successful “Debt Arrangement Scheme” with the proposal for an early exit from it, should creditors accept composition of their debts by the debtor, being rejected. • The current judicial rate of interest on accrued debts should be reduced from 8% to 2%. • Provisions should be introduced for an “Information Disclosure Order” (IDO) o Creditors must first consider whether it is possible to proceed without an IDO. If not, then they must seek advice from a professional advisor and be in possession of a decree or equivalent with a charge for payment having been served. o The Sheriff Officer will have three months to submit the application if information is required from a third party. o To prevent asset concealment the debtor will not be notified in advance of the application. • Exceptional Attachment Orders, which permit the removal of property from the debtor’s home, will be unaltered other than increasing the value of sentimental assets, which cannot be attached, from £150 to £500. • Inhibitions, which can prevent the debtor from selling or mortgaging their heritable (freehold) property for five years, will remain. • Employers will be obliged to advise creditors within 21 days whether an earnings arrestment has been successful. • All arrestees, including banks, will be obliged to advise creditors if an arrestment is unusual.

A bumpy flight?
Legally represented claims: The perils of paying direct

Published 10 October 2022

Iain Campbell explains the unwelcome implications of a recent decision in the UK supreme court. INTRODUCTION A firm receives a claim from its customer, represented by solicitors. The claim seems justified. The firm decides to pay it. The solicitors tell the firm to send them the compensation. The firm sends the compensation directly to the customer. What happens next? This question was considered by the Supreme Court in the judgment delivered in March 2022 in Bott & Co Solicitors Limited -v- Ryanair DAC. It concerned passenger compensation claims against airlines, due to flight delays, but applies equally to claims brought on credit or hire agreements. THE FACTS The solicitors used an online tool to promote flight delay claims, offering to limit their fees to a percentage of any compensation won. The tool was successful, with up to 1,000 claims a month registered. The solicitors passed the claims to Ryanair and told Ryanair to send them the compensation. They intended to take their fees out of the compensation, then pay the balance to the customers. Ryanair paid the compensation directly to the customers, preventing Bott from deducting their fees. Nearly one third of the customers kept all the compensation, leaving Bott out of pocket. EQUITABLE LIEN In proceedings against Ryanair, Bott asked the court to order it to stop paying customers directly, whenever Ryanair knew Bott were acting, and to make good the missing fees which had been kept back by some customers. The legal basis for this was the ‘equitable lien’. Designed to protect solicitors’ rights, this gives them an interest in receiving claim proceeds, where the party making payment knows of their involvement in a claim. THE ISSUE Ryanair argued it had introduced its own online claims tool, so there was no need for customers to use Bott to notify claims. Ryanair pointed out that customers could receive 100% compensation by using its own online tool, so it was unfair to make Ryanair pick up Bott’s fees where the customers had been paid directly in full but kept all the money. The equitable lien is not new, but the court wrestled with whether it could be used where: • There was no real dispute (the passengers were clearly entitled to compensation). • The solicitors had only used an automated system to notify theclaims. The Supreme Court held it was fair to make Ryanair reimburse the fees, rather than to force Bott to claim them directly from their clients. Equitable lien was a way of protecting solicitors’ claims to their fees, enabling them to take on work they might not otherwise risk, and so it promoted customers’ access to justice. This principle applies where the party paying compensation was aware of the involvement of the solicitors, in connection with a claim, even if the claim was undisputed. Work by the solicitors did not need to employ much skill. Their steps could be largely automated. This lien even applies to very early stages of work to prepare a claim, such as …

Laying the groundwork
The path to the Consumer Duty

Published 10 October 2022

In its 2022 – 2025 strategy paper, the FCA stated that “by acting earlier and more assertively we will prevent harm and intervene before problems become systemic”. Consumer protection is at the heart of this and the FCA’s increasingly assertive supervisory approach is likely to put significant pressure on retail lenders and other firms operating in the consumer credit sector. Indeed, with inflation predicated to reach or even exceed 14%, many consumers will see a reduction in disposable income and some may experience financial vulnerability for the first time. In this context, the FCA is concerned about the potential for an increase in reliance on credit, and is likely to take a strong stance against firms which seek to take unfair advantage of these difficult economic conditions. In this regard, the FCA has at least been transparent about its expectations. On 16 June 2022 it issued a Dear CEO letter to around 3,500 retail lenders reiterating the importance of treating borrowers fairly. In particular, the FCA emphasised the need for lenders to ensure that their approach to new borrowers takes account of their financial pressures, to consider their treatment of vulnerable consumers, to ensure that fees charged are fair and to direct consumers to money guidance or free debt advice services as necessary. The FCA followed this up with a further Dear CEO letter, on 27 June 2022, aimed specifically at mainstream consumer credit lenders. In this, the FCA reiterated its concerns about the potential growth in demand for credit and confirmed that ensuring consumers in financial difficulty receive fair and appropriate support remains a key priority. The FCA indicated that firms should not seek to increase business, or otherwise benefit from increased demand, by reducing the stringency of affordability checks and should continue to apply reasonable and proportionate checks on applicants, including taking steps to determine or reasonably estimate their income, as required under the existing Consumer Credit Sourcebook rules. Firms will also need to consider and review their affordability and creditworthiness policies, and to assess what management information they will require to monitor this effectively. In assessing the industry generally, the FCA has previously expressed concerns about levels of engagement with customers, in particular that firms may not always take sufficient steps to understand individual customer circumstances and may not consider an appropriate range of forbearance options. To alleviate the regulator’s concerns about this, firms should ensure that staff – particularly those in customer facing roles – are sufficiently experienced, and have appropriate training and support, to cope with a potential increase in customers who may be in financial difficulty. Perhaps most significantly, on 27 July 2022, the FCA confirmed plans to bring in a new Consumer Duty requiring firms to deliver “good outcomes for retail customers”. As part of the new Duty, firms will need to focus on supporting and empowering customers to make good financial decisions, and there will be specific requirements to make it easier for consumers to switch or cancel products. As part of …

Balancing creativity and clarity
Creating engaging content in a regulated industry

Published 10 October 2022

The role of a marketing professional requires creativity and innovation. In fact, one of the sacred rules of brainstorming is that ‘no idea is a bad idea’. However, for those working in highly regulated industries this can often be far from the truth. For marketers in financial services, their priority must lie with ensuring they are clear and transparent with their audience, following carefully structured regulatory guidelines, which are there to protect consumers. Natalie Gomez, Marketing Manager at GAIN Credit discusses how working in a regulated industry has changed her outlook on her chosen profession. “I’d say I had a largely stereotypical view of what finance related content looks like. I thought it would be a little vanilla and very formal”. After writing content for the hospitality and travel industries for almost a decade for Natalie, complacency was a risk. The decision to challenge herself and her writing led her to fin-tech consumer lending. Natalie says her role at GAIN Credit “opened my mind and completely shifted my perspective on content creation”. GAIN was seeking a marketing professional from a non-finance background to bring in a fresh new perspective to content creation. The mantra, ‘if you don’t understand what you write, no one will’ led to this requirement. The mantra holds true across all industries, but is especially important in the consumer lending space, where clarity and transparency are so important. “There were a lot of unfamiliar financial terms thrown out initially – I had to double check the meaning of APR when I joined! I’ve asked hundreds of questions along the way, and have worked closely with the compliance team to write in a way that’s most helpful for our customers. Most of our customers would mirror my limited understanding of financial terminology, so putting our heads together to write content has dramatically increased the quality. I’m able to put myself in the shoes of the reader and strongly believe that if we speak clearly and with transparency, we build better relationships with our customers.” “As a marketing professional, it’s always been important to stay up to date on trends. It’s an ever-changing industry. As a marketing professional in financial services, I’ve found it equally important to stay up to date on the regulations. With the support of compliance, this ensures I can communicate with our customers in a way that protects them from unwittingly entering into a decision they may not fully understand.” “This has only developed my content writing skills. The best writers will break down information, to make it easy for consumption.” For people facing a challenging financial situation, seeing an ad that promises ‘We are here to help, instant unlimited cash that you can pay back anytime’ can be tempting. However, there are key details missing here. Many companies in the consumer lending space will fulfil regulatory obligations using finance specific terms without clear explanations. GAIN Credit believes in avoiding financial jargon in favour of simplicity. Natalie explains, “speak to customers, as you’d talk in …

Stark challenges ahead
Social enterprise lender launches second social impact report

Published 10 October 2022

Lendology CIC, working with council partners, is a Social Enterprise Lender providing access to low-cost finance for homeowners who may typically be excluded from mainstream lenders. Their second annual Social Impact Report has been prepared to evidence how their lending translates into tangible improvements to individuals, communities, and councils across the UK. This report documents Lendology’s activities across 2021/22 and provides an independent assessment of the benefits this has generated. It has been reviewed by the Financial Inclusion Centre, a not-for-profit research firm by combining: • analysis of data for the 226 loans delivered during this period; • structured surveys sent to 180 borrowers via email and post, and completed by 70 customers (representing 39% of clients during 2020/21); and • 19 surveys conducted with representatives from 14 of Lendology’s 18 council partners. With over 51% of households in the South West not having access to emergency savings, over 11% of households in fuel poverty and 24.2% excess winter deaths each year, the Report highlights the stark challenges already faced in the region, even before the energy and cost-of-living crisis hits this winter. Healthy homes are critical to the health and wellbeing of its occupants and reduce the impact on local services, such as the NHS. Housing is a ‘social determinant of health’ that can dramatically impact physical and mental health inequalities throughout life. Ensuring homeowners have access to fair finance to maintain their homes means that homes are kept healthy for the families who live within them. Emma Lower, CEO at Lendology, said: “The Social Impact Report that we produce each year goes some way towards highlighting the fundamental need for the service that we provide. Without the funds provided by each of our council partners, we would not be able to help these homeowners from across the region. The assumption that the inhabitants in the South-West are affluent and do not require assistance has to be changed. “Each year the council enables us to support clients who have a variety of needs, however, we are still talking to some homeowners who have no central heating or hot running water in their homes. I am delighted that yet again we could make a positive difference last year, and whilst we had a record lending year, it is not the money that drives us to do more, but the impact that the loans we provide have had. This report enables us to show the difference that a council loan has made to the family, the home, and the community as a whole”. Read the full Social Impact Report here.

Bringing it all together
Improving performance management

Published 10 October 2022

Martijn Groot, Collections Control Specialist at Aryza, discusses how technology can help credit managers in banks and other institutions to drive efficiency and improve performance management processes. With many consumers cutting back on everything but the essentials and businesses grappling with lower consumer spending, alongside rising costs, the number defaulting on their pre-agreed payment arrangement is only set to increase. To avoid cash flow problems and businesses falling into debt themselves, credit managers are striving to become more efficient at managing debt. BRING EVERYTHING TOGETHER FOR GREATER VISIBILITY Managing an arrears portfolio of credit records is far from an easy task. With recording handled by a range of different collection partners, the information provided and formatting of these documents can vary significantly. Alongside this, accounts are all at different stages, and each is assigned to an individual with their own, unique circumstances. Overseeing the collections process for each of these accounts (whether there are ten or 1,000) requires significant resources. Those unable to keep the debtor informed of their position and options will, over time, damage their reputation and potentially lose business. This is where technology can help with performance management software as it is able to provide banks and other companies with full visibility of the entire process, rather than having staff browse through several disparate sets of information. The ethos of these systems is to bring all the information from multiple collection partners, databases, and locations into one centralised place. It can then be displayed in a consistent and easily understood dashboard with predefined KPIs. HAVING A HANDLE ON YOUR COLLECTIONS PROCESS Healthy cooperation along the credit management chain depends on shared ideas and understanding. Aryza Control creates a uniform view of case data and offers powerful tools for analysis and cooperation – all vital elements for an effective partnership. Gaining insight is the key to achieving an optimum spread of the benchmark portfolio and improving yield. IMPROVED REPORTING One of the most time-consuming tasks in any business is the creation of reports. In the sensitive and tightly regulated field of debt recovery, it can take even longer. Through the deployment of specialist technology, businesses can generate more than fifty different types of reports in a matter of minutes, depending on the information that’s needed. These can be generated automatically or in line with each client’s requirements. This data is automatically monitored and can provide powerful insights to enhance the decision-making process. For example, it allows businesses to see how their relationship with individual collection providers is faring in terms of a cost-benefit ratio, and whether that company is in line with standards for socially responsible credit management.

Navigating a volatile environment
COEO, collections and current consumer trends

Published 10 October 2022

Keeping in-line with customer trends is crucial when it comes to collections. When we understand how events, such as the cost-of- living crisis, will likely impact customers, we can prepare and adapt strategies to create better outcomes for all. This article shares a selection of customer trends we’ve uncovered and what to expect next. CHANGING WAYS OF CUSTOMER ENGAGEMENT The most significant shift we’ve noticed is the incredible growth of digital adoption. Digital engagement has become the norm for all stakeholders (including clients), with the need for information and action to never be further than a few clicks away. It is more important than ever to offer customers more flexible ways to engage with us and address the consumer shift to digital channels. CHANGING BEHAVIOURS It will come as no surprise that there has been an increase in financial vulnerabilities due to the cost-of-living crisis, resulting in difficulties for customers trying to maintain contractual payments. UNDERSTANDING VULNERABILITY IN COLLECTIONS It is vital to understand when a customer is vulnerable, as, in collections, it often directly impacts their ability to manage finances. Continuous vulnerable customer training, alongside coaching and testing, ensures customer-facing staff and specialist support teams are equipped to deliver good outcomes for customers facing a variety of temporary or permanent vulnerabilities. Examples include: • Having prescriptive, efficient, and effective methods for identifying vulnerable customers. • Actively listening to be thoughtful, consistent, and clear in agreeing to an appropriate way forward. • Segmentation that can be translated into appropriate action has also increased as a more profound analysis of vulnerable customers allows us to find targeted solutions for specific circumstances. This investment in developing a greater understanding of customers and the nature of their vulnerabilities has helped develop strategies that create consistently better outcomes. WHAT WE EXPECT Considering the impact on affordability, we anticipated and are now experiencing a reduction in instalment values; (and an increase in payment plan lengths). As previously mentioned, digital journeys also play an increasingly significant part in the lives of people today. We expect this will continue to rise across all sectors; therefore, it becomes essential to have high-quality digital journeys that are continuously reviewed and improved based on customer feedback. FINAL WORDS As with many things, there is no single solution. Short-term intervention needs to be balanced with longer-term solutions. For example, better education has a part to play. In addition, a more significant focus on financial literacy from a younger age will help prepare individuals with the tools they need for a more financially savvy future. In the meantime, the focus in collections shall remain on making solutions simple for consumers and creditors in an ever-volatile macro-environment.