Vulnerability and money worries go hand in hand. Philip Holden, executive chairman of drydensfairfax solicitors, describes how the industry needs to work together to better treat customers during the collections process.
Christmas can be a difficult time of year for many people. A combination of increased spending and financial worries together with the ‘perfect Christmas’ myth perpetuated by the media can lead to feelings of despair.
Money issues are a particular problem. According to research by the National Debtline one in three consumers will be using credit cards to get through the festive season.
As we already know money worries and vulnerability go hand in hand. When a borrower finds themselves in a vulnerable situation they often struggle to manage their finances and mental health problems in particular show a clear correlation with financial troubles.
Of course there are systems in place within financial services businesses and those customers who are identified as vulnerable will be treated accordingly. Depending on the nature of the vulnerability we as creditors and law firms make a case by case decision on how to proceed.
Our standard process with many clients can be to close cases where the customer is experiencing a period of significant distress. However, is this strategy the most effective for all involved? I’m not sure that it is.
Suspending action or closing a case is not necessarily in the customer’s best interest. Experience tells us that customers want to pay off their debt to the best of their ability and want to be debt free on the right terms.
Taking a blanket approach to all customers classed as having a serious vulnerability, at that moment, and closing the case for an undetermined amount of time seems a step too far.
In addition, there is the danger that the case will go back into the system in years to come via a different collections business. This could mean the customer having to retell their whole story as the different supplier would not know their previous circumstances.
Customers who have outlined their case and made known the specifics of their condition will be back to square one.
A recent case springs to mind about a customer who was clearly vulnerable having recently left an abusive relationship while battling depression and anxiety. They had made it clear that telephone calls could bring on anxiety attacks and excessive documentation left them feeling overwhelmed.
Rather than closing the case upon identifying the vulnerability we were able to tailor our service to their needs. This involved communicating by email where possible and conducting high level questioning to ascertain how much they could afford to repay. This saved them having to fill out an income and expenditure assessment which they had specifically said overwhelmed them.
As a result, we were able to reach an agreement whereby the customer would repay the debt at a rate of £10 per month and most importantly we were able to keep a positive line of communication open.
They were able to retain some control over their financial situation and pay down their debts and our client receives payment. Had this case simply been closed the outcome would not have been as beneficial for any party involved.
The fact is that mental health, and indeed vulnerability, is a fluid concept with differing manifestations and consequent needs. As with all human behaviour it changes.
In order to properly help both our clients and their customers a more long term approach is needed. We need to maintain ‘soft’ contact with the customer, assessing their situation at intervals that suit their circumstances and adjusting their repayment strategy as a result.
We take advice from a British Association for Counselling & Psychotherapy accredited counsellor and trainer so the customer will be understood, helped and ultimately, we will address their liabilities in a way which reflects their circumstances fairly.
This, of course, takes time and effort and must be remunerated as such. The current pay structure within the debt industry in general is antiquated and simply does not work in this context.
Compliance and regulation has had a significant impact on the way firms operate and commission and fees must change too. When it comes to vulnerable customers, managing and supporting a customer, monitoring their situation and working with them to meet their needs is clearly the most sensible approach. However, we need to move to a customer management solution rather than a commission based fee structure.
We’re currently working with one major creditor who has already agreed to pay us on a case management basis but this needs to be a widespread approach for more sensitive matters.
This means that those customers have one contact point, as the creditor has passed the management of the customer relationship to us, making the whole process less stressful for the customer.
The rest of the industry must be willing to adapt too. By doing so we can actually make a difference to customers in vulnerable situations and help them rebuild their lives.