It’s hardly surprising that the current cost of living crisis has seen a sharp rise in people with problem debts. Recent figures suggest that one in three households have missed paying a bill in the past year, and this looks set to rise.
In this atmosphere, calls have been growing for banks and credit lenders to take a more flexible and compassionate approach to repayment by vulnerable debtors.
The Problem With Lenders
Recent research by Sopra Steria suggests that financial institutions such as banks and building societies haven’t been very successful at showing compassion to vulnerable people. In fact, 38% of people who have experienced financial difficulties reported never having experienced a personalised service from a financial organisation.
In addition, 59% considered that banks or building societies they’d dealt with had shown no compassion for their situation. This suggests that financial institutions need to work on identifying vulnerable customers and distinguishing the can’t-pays from the won’t-pays.
Flexible Debt Management
Of the people polled by Sopra Steria, 27% expressed a desire for more flexible approaches to debt management. One suggestion, for example, was to allow monthly payments to vary according to fluctuating resources. Another suggestion, supported by 79%, was for a missed payment to be spread out over the year, instead of simply creating a bigger problem the following month.
According to Craig Wilson, MD of Private Sector for Sopra Steria, “As the cost of living continues to spiral, it is no surprise the number of vulnerable or low-income families across the UK is rising, with many turning to personal debt and credit to pay bills…There needs to be a turning point, starting with increased understanding of vulnerability and the improvement of services to enable people to better budget and plan their financial lives.”
What Does This Mean for Creditors?
While it’s good to be compassionate to vulnerable debtors, not all creditors are large organisations, and some may be small businesses who are also struggling. So what does compassion for debtors mean for creditors?
In fact, taking a creative and cooperative approach to debt management can often be the best option for both parties. For example, allowing repayments to be spread over a longer period may be the most likely way of ensuring that you eventually get all your money. By contrast, taking a hawkish approach such as court action may result in only part of the debt being repaid.
The crucial issue, as already mentioned, is to use the available data to distinguish the debtors in genuine trouble, who may well want to pay you, from those simply trying to avoid payment. This takes skill and experience, which I can provide. Give me a call to find out how I can help you with both the can’t-pays and the won’t-pays.