Income and expenditure (I&E) checks, and creditors’ varied approaches to them, is an ongoing issue for suppliers. Credit Strategy searches for signs of coalescence across the industry, and asks if current policies are pragmatic enough for good customer outcomes.
There has been a movement towards consensus in many areas of collections in the past five years.
That hasn’t been straightforward, but advice agencies, collections firms and creditors have thrashed out differences to reach some level of accord on various policies – hence the coming launch of the Standard Financial Statement (SFS).
Now it seems customers might benefit if a similar convergence was expedited over I&E checks, specifically creditors’ policies over how they’re conducted.
The disparate procedures and guidelines for these checks, according to suppliers, often leads to unnecessary effort and time being spent by both a supplier and customer. A common thread through their concerns is a hampered ability to deliver the right outcomes for consumers.
This is not entirely new. I&E checks have been in the spotlight for a long while now, throwing up various questions:
Does an I&E check really need to be carried out at every point of contact with a customer? Would it improve the customer experience if there was a convergence of policies among creditors? How can the process be digitised?
It probably sounds familiar now to say that debt collection agencies (DCA) and law firms still get calls ‘failed’ if they don’t carry out an I&E check when a customer insists on making a payment, despite the fact the customer doesn’t want to do an I&E check at that time.
Here lies a tricky question; is the I&E review’s purpose to assess ongoing affordability and the ability to make a one-off payment? If it’s always both, then perhaps offers of one-off settlements shouldn’t be taken at face value.
Cabot Credit Management (CCM) said it does see calls failing across its DCA panel, which it reviews monthly, when the appropriate levels of affordability are not established and this includes the gathering of I&E information.
The Credit Services Association (CSA) said the common issues its members encounter regarding I&E checks is that customers often find these checks to be a “waste of time, patronising and intrusive”.
One supplier explained that when creditors pass paying books to DCAs they aren’t always given the latest I&E review, or even the date of the last review, of a customer.
It said this can cause detriment to the process because having no prior I&E data to compare new checks with, means a DCA can’t tell if the customer has made any mistakes.
Point of contact
The CSA said the approach across all financial services companies is initially the same and will always attempt to carry out a full I&E check at the first point of contact with a customer.
The trade body added: “Clients’ opinions vary as to whether proactive I&E assessments should be attempted on a six monthly to 12 monthly basis.”
It also said one notable difference between the financial services sector and the telecoms and utilities industries is that clients in the latter two sectors are not prescriptive in the use of I&E assessments, when looking at affordability.
From a regulator’s point of view, the Lending Standards Board (LSB) said its new standards of practice require firms to demonstrate an empathetic approach and act upon information provided by the customer to develop an affordable and appropriate solution.
Adding some further balance to the debate, a spokesperson for the law firm Shoosmiths said: “The imperative of creditors is to ensure that the customer is not committing to a repayment arrangement which is not affordable.”
Some contractual obligations which creditors make, are that I&E checks are carried out at every point of contact with a client. But Shoosmiths believes an annual I&E check is all that is needed, and sometimes not even that often.
Gary Gilburd, chief executive of outsourcing company Sigma Financial Group, said: “There is no doubt that applying a rigid policy to how I&E checks are conducted is not going to be appropriate to all customers. In certain circumstances it will cause frustration and annoyance.”
One supplier, who wished to remain anonymous, clearly felt had stronger views, describing creditors’ policies as “erratic” and “generally unhelpful”.
The supplier added: “Creditors simply do not understand what is important. It is their desire to have boxes ticked on a big form rather than rely on common sense for each case.
“This means customers are put through an often inappropriate process and it makes us unpopular by making this an unpleasant experience for them.”
In fairness to creditors, the CSA said that feedback from its members suggests that creditors do not expect an I&E check to be completed on every call, but should rather be managed on “a case-by-case basis and not ‘one size fits all’.”
One element that will make a part of this process more consistent and coherent for customers, is the Standard Financial Statement (SFS) which will be implemented next month.
This single standard format will have a set of guidelines for gathering I&E and will hopefully be used by all creditors and debt advice providers.
The Money Advice Service has collaborated with representatives from the debt advice and creditor sectors to agree on the best format for the SFS.
It is intended to replace the many alternative financial statements currently in use and create a more streamlined approach of sharing data between organisations.
The SFS will include a savings category to help people build financial resilience while repaying their debts.
Shoosmiths is keen to see the SFS savings feature reflected in how debt management companies calculate the income and expenditure. It also hopes to see repayment plans based on an equitable distribution of the available disposable income against the outstanding balance of the debt, rather than any distribution based on original contractual payments.
Another proposed solution from a supplier is that firms collecting debt should be able to carry out a shorter I&E check if a creditor’s policy is to carry out frequent checks.
But some believe the SFS solves only part of the problem.
Magnus Bray, business development vice president for online identity verification service The ID Company, said: “Although the SFS arrives next year, it doesn’t address the cost and friction for consumers and businesses in getting data into the process. Getting accurate data, particularly for I&E, is still a key problem.”