We’ve just commissioned some independent research into “Fairness in Collections” to gain a deeper insight into the issues facing people who are in debt.
We talked to 556 UK consumers and nine heads of collections from organisations including utility companies, banks and mobile phone operators.
One of our most worrying findings was that an overwhelming majority of people are experiencing stress due to their level of debt. Shame and worry about their situation are deterring them from seeking help, forcing them to turn instead to more harmful coping strategies such as high-cost credit or unsustainable spending cuts1.
Almost three quarters (71%) of the people we surveyed admitted that they were under stress because of debt, and this rose to 78% among respondents who were in difficulty for the first time.
Even before the Covid-19 pandemic, more than 600,000 people per year were contacting debt charity StepChange for help2. But the pandemic has dramatically increased levels of debt, as many people struggle to pay their bills for the first time. According to Citizens Advice Bureau3, 6 million people have fallen behind with their household bills since March 2020.
And the Centre for Mental Health estimates that half a million more people in the UK may experience mental ill health as a result of the pandemic4.
Hopefully, many of these debt issues will be temporary and those who are now struggling will bounce back. However, they’ll remember their experience of debt collection for a long time to come. With retentions increasingly becoming a vital part of any organisation’s revenue, it’s crucial to provide customers with seamless and meaningful support in their time of need.
So it’s vital that organisations take all of these insights, including those in our new Fairness in Collections research, into account when they consider how to collect outstanding payments in a way that improves outcomes for both their customers and themselves.
Our findings suggest that providers can do more to reassure their customers that they want to help them. A third (36%) of the respondents with unmanageable debt in our survey hadn’t spoken to their provider about their situation. Most consumers are hesitant to initiate contact – 62% admitted they’ve avoided communication and waited for the company to contact them first. Feelings of shame are driving this – more than a quarter (28%) of all respondents admitted that they felt embarrassed about their debt problem.
Organisations can also be more proactive about helping their customers to deal with debt or avoid getting into debt in the first place, by using data they already have to understand them better and to intervene before problems start. They could, for instance, use end-to-end monitoring and automation to communicate with customers at the best time and in the best way for them, engaging with them as soon as they appear to be at risk of getting into debt to discuss the best solution.
All of the organisations that we spoke to want to help their customers and agree that it’s essential to discuss debt with them. And yet 61% of the consumers we spoke to (who were not necessarily customers of the companies we spoke to) with unmanageable debt and who had previous experience of being in debt said that the process of dealing with a company they owed money to during 2020 has been more stressful than it has been in the past. Only 45% of them said companies were more empathetic now than they were during their previous experience. This implies that the majority of our respondents who have been in debt previously have been treated worse this time around.
This disconnect between organisations’ intentions and people’s actual experience suggests that collections teams need to review their communications strategies. Our report’s message is clear: reaching out first and being supportive are essential to engaging with distressed customers. People need to know that they’ll be treated fairly and that things will get better if they ask for help. Organisations that get this right can create successful outcomes for themselves and consumers, while protecting their long-term relationships with their customers, ensuring loyalty long after the current crisis has passed.