Nearly I.2 million people in the UK have made use of Payment Holiday options introduced since the outbreak of the Corona-virus in early spring of 2020. UK Finance has found that approximately 70% of people who took Payment Holidays did not need to for Financial reasons and had done so more as a preventative measure. In isolation, that looks like it means they would be able to pay them back easily. The problem is that as we reach the end of the government-backed furlough scheme and the job market has tightened, with many companies finding themselves not in a position to bring back all their staff, many people are just now entering a period of financial hardship. Suddenly paying back what they owe for their three to six months of Payment Holiday is a lot more difficult.
This will shortly begin to have a knock-on effect on lenders and other Financial Services providers. The work of recovering all the money owed is going to be, for many companies, a large scale project, and one that will require a lot of sensitivity and awareness around vulnerable customers. For customers who were previously designated as vulnerable, questions may be raised about whether they should have been granted Payment Holidays knowing they may be less able to meet later repayments. There will also be many customers who were not classed as vulnerable when they made the decision, but who now find themselves falling within that status and who are unhappy about how that effects their treatment and their ability to access products.
So far, some of the UK’s biggest banks have set aside over £6 billion to cover the expected bad debts arising from individuals and companies who can’t repay loans and mortgages. Figures released by HM Treasury show 1.13 million businesses have been supported by finance from lenders because of Coronavirus. While those loans have been backed by the treasury, theoretically removing risk to lenders, some have raised concerns about the damage that could potentially be done to the reputation and standing of commercial lenders who have to pursue struggling small businesses for repayments.
Anyone working on collections and debt recovery over the coming months will need to be empathetic, active listeners who can carefully handle emotional customers in very difficult situations. That’s a difficult task, and it will be harder still to have these interactions in a way that retains these customers as brand loyal for future business. We know the FCA has made Vulnerable Customers a focus area for this year, so businesses are going to need to handle this well or they could be facing intense regulatory scrutiny. In late July the FCA published new guidance to help firms in this area, which identifies four key drivers for establishing vulnerability: health conditions or illnesses that affect the ability to carry out day to day tasks, a low ability to withstand emotional or financial shocks, recently experiencing a major life event such as bereavement or job loss, and low knowledge or understanding of financial matters and related digital and literacy skills. Clearly, in a still-ongoing global pandemic, many more people than before will sadly fit into those first three categories, whether due to being infected themselves, having lost or being consumed with worry about unwell friends and relatives or because they have lost their job and their previously reliable source of stable income.
We may also need to be concerned about staff who are currently working from home. While remote work is an important way of reducing infections, there are downsides to it that become clear in the face of this kind of highly sensitive, complex work. Staff working from home may not be checking in with colleagues and managers as regularly, and it can lead to them unconsciously relaxing their normally stringent work practices and that’s on top of practical distractions like children and pets which aren’t a factor in the office. All of this could be made worse by the stress of the situation – staff know these are high priority complaints that need to be handled correctly to avoid escalation, and they may feel pressured to quickly make decisions without properly considering the full context of a customer’s situation.
It falls to Senior Managers to make sure that teams are not just aware of vulnerable customers, but that an understanding of vulnerability is built into processes and procedures. Firms may feel that technology-led approaches have set them up to succeed here – and while that may be cost-effective, it could be to the detriment of the customer, both in terms of a lower quality customer experience without that human, emphatic element, but also, some vulnerable customers have that status because they don’t have access to or reasonable understanding of technology.
There are questions to be asked across both retail and commercial lending right now: is your collections capacity ready? Kind Consultancy is in contact with clients across the Financial Services space and we know some lending businesses are already dramatically scaling up their Collections capacity, while others are hoping to move in staff from other parts of the business. However, with Complaints also looking to have a spike in the coming months, organisations may find that their staff who are best prepared to deal with customers in debt and in a difficult situation are stretched to breaking point. Others still have recognised that the staff they do have simply do not have the necessary training, knowledge or experience around vulnerable customers, meaning that especially in a high-pressure time, there’s huge scope for complaints-generating interactions.
Kind Consultancy is already working with a number of firms in this area, with our Kind Agile Solutions service, we have a bench of pre-screened contract talent, including a number of Collections professionals. Our KAS team members are regularly re-screened by Kind to make sure their qualifications are up to date, we make sure they have industry-best knowledge and experience and many of them have worked together before so we can install a full team who t already have a strong team working ethic they’ve built up together, enabling them to truly hit the ground running and rapidly get to grips with the Collections situation in your business. These are professionals who have the knowledge and experience that firms need in order to appropriately take care of customers during this very difficult time.
For a confidential discussion about your Collections resource needs, contact Selena Tye on 01216432100 or e-mail firstname.lastname@example.org
Read more from Selena on – Lending After the Pandemic: The Long Road Ahead or What Are The Long Term Financial Impacts of a Pandemic?