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Debt Crisis Lending

Can You Steer Your Customers Through the Debt Crisis?

Tuesday, 26 July 2022

By Anthea Coulter, Account Director at EQ Customer Resolutions

Anthea Coulter Anthea Coulter Account Director at EQ Customer Resolutions

The soaring cost of living is clearly posing challenges for everyone, including the financial services sector. Just as the Financial Conduct Authority reminds lenders of their responsibilities to vulnerable customers, those same companies are finding their resources stretched by mounting levels of consumer and business debt. It is expected that disability and vulnerability cases will continue to increase by 20% all the way up to 2030. With these significant challenges, how can firms improve their support for struggling customers in such difficult circumstances?

When a business the size of Lloyds Banking Group provides 64,000 employees with a £1,000 payment to help them cope with the cost of living, it’s clear we’re living through extraordinary times. We’ve all seen the media coverage of people struggling with their financial obligations, and an Office of National Statistics survey this spring found that 77% of adults are worried about the rising cost of living, with 50% worrying about it ‘nearly every day’.

Following hot on the heels of the pandemic crisis, this also piles extra pressure on the financial services sector as hard-pressed customers struggle to keep up with payments. On 16 June, the Financial Conduct Authority (FCA) wrote to more than 3,500 lenders “to remind them of the standards they should meet as consumers across the country are affected by the rising cost of living”.  With inflation soaring, interest rates rising, and energy prices set for another hike in the autumn, these problems are set to intensify, and it’s not just consumers that are struggling – many business borrowers are also in financial difficulty, often exacerbated by the supply chain problems that developed during the pandemic coupled with consumers reducing their spending on home improvements, meals out, take-aways and other non-essential items.

What are lenders asking?

As a result, we’ve been in discussions with financial services companies and debt collection agencies who are keen to explore fresh ways of managing customers in financial difficulty – both in terms of coping with current volumes of debt, and preparing for it to get even worse. Several questions keep popping up. Do we have enough staff in place to speak to customers who are in difficulty? How much of this capability exists and where it doesn’t how do we forecast accurately to know when to bring in more people and at what skill level? Do our staff need additional training? How do we balance FCA requirements with practical business logistics? And how can we rise to the challenge by improving our processes?

While the recent FCA letter emphasised its exacting standards for the support of vulnerable customers, the Financial Ombudsman Service has also set out the four following expectations:

  • Staff must be trained to recognise vulnerabilities.
  • Autonomy should be given to staff to manage vulnerable customers and offer appropriate remedies.
  • Vulnerable customers should be provided with ongoing support.
  • Individual staff should take ownership and accountability for the vulnerable customers they are helping.

Many financial services firms believe the fourth point is unrealistic, and incompatible with standard working practices and shifts. Yet the industry is obliged to seek ways of achieving it. Meanwhile call centre staff are increasingly expected to seek insights into the personal lives of incoming callers to identify vulnerabilities. This also creates a heightened risk of antagonistic conversations with the role of some frontline staff becoming more akin to counselling.

An opportunity to restore trust

Yet there is a positive side to all this. Many financial service companies managed their customers with great sensitivity during the pandemic crisis, rebuilding some of the trust that was eroded by the collapse of the banks 14 years ago. In that sense, the cost of living crisis is an opportunity for the sector to continue that good work and build stronger customer relationships for the future. And this is not just in terms of customers facing financial hardship but also the reputational gains that can be achieved with the wider public, politicians and regulators.

That may mean reviewing average handling times, and reallocating resources within your business to address the debt crisis – perhaps from areas that are currently quieter, such as mortgage applications. Coupled with a review of your marketing and communications channels (including webchat) to ensure that all vulnerable and financially distressed customers are clearly directed to a well-trained, empathetic person at the end of a phoneline and not left going round in circles on automated systems.

Even in this omni-channel world, nothing can replace the warmth of a human voice. It’s that care and thoughtfulness that builds trust and creates value within an organisation.