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How to limit your losses while practising responsible debt management?


By Nic Marshall, CEO, ResQ

A recent survey by the Financial Conduct Authority (FCA) has found that 12 million people in the UK are experiencing low financial resilience, with two million become financially vulnerable since February of this year.

This should come as no surprise, as the unemployment rate continues to rise and those people who are still in jobs are dealing with a reduced income, partly funded by the Government’s Coronavirus Job Retention Scheme.

There are real stories of hardship behind these figures, with some people experiencing financial difficulty for the first time in their lives to the point where they are unable to pay their bills or arrears and in some cases, their standard of living has deteriorated.

It is imperative for organisations to exercise a high degree of flexibility in these unprecedented times and put the customer at the heart of their debt management process. But how can business leaders continue to protect their own organisation whilst supporting their vulnerable customers?

Here, we share some best practice guidance.

Identify the vulnerable

The first step is to avoid a one-size-fits-all approach. Although simple to implement, organisations with a blanket approach can come across as cold and detached from their customers – a particularly risky strategy when we consider the difficulties people are currently facing as a result of the global health pandemic with no shining light at the end of the tunnel just yet.

Depression and other mental health issues have soared during the pandemic. Organisations need to consider the fact that there are increasing numbers of people who are unable to deal with their debts and didn’t ever imagine they would be in such a difficult situation – a caring and empathetic approach is needed.

Professional training should be provided to customer service teams to ensure they are able to identify those who are vulnerable and need help not red letters, spot the signs of someone not coping and have the skills to respond accordingly.

Establish engagement

Communication should be at the heart of every debt management approach. Communication should be supportive and aimed at alleviating people’s worries and anxieties – not intensifying them. Offering care, support and genuine concern will not dilute the ultimate outcome. In fact,

where appropriate steps are taken and a professional engagement with the customer is established, the business is most likely to achieve an optimum result.

Adopt a long-term approach

These uniquely challenging times require a change of perspective. Taking a long-term view with the assumption that debt will rise significantly during this period but may be recoverable beyond that is becoming very important.

Such a long-term stance is also important for customer loyalty. Customers that have been offered flexible options, such as debt deferrals, staged payments or payment holidays are likely to return to brands that have provided a high degree of support and empathy during a difficult period.

Consider outsourcing

Counsel from external debt management partners can optimise the process for all parties involved and can help avoid some of the common pitfalls. External support can take the shape of consulting in relation to policy and processes, provision of resources, development of templates, training, compliance and analytics/reporting.

It is essential that your chosen external partner is highly aligned with your company’s brand and organisational culture and demonstrates expertise, as well as a strong focus on customer protection.

In the current climate, business focus has shifted to maintaining a positive cash flow. In this economic environment, debt management should not be treated as a by-product of the sales cycle but as an integral part of customer care. It is therefore critical for companies to approach debt management in a strategic way, while being mindful of the shifting Covid-induced customer needs and expectations.

ResQ’s ‘Debt Management in a New Debt Era’ whitepaper delves into the challenges associated with changing customer needs during the pandemic and provides guidance on some of the key areas of debt management. To download the whitepaper, click here.

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