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Complaints Performance Reflects Upheaval In Consumer Credit And Home Finance Sectors

20 May 2021

EQ’s unique insight into complaints data and trends reveals that closure rates are suffering whether complaints volumes go up or down. 

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Volumes across different sectors vary but all show signs that performance levels in resolving complaints are suffering. With slower resolution times and an increase in 8-week timeframe breaches, firms are clearly struggling in the face of the significant operational and cultural changes of the past year.

This is particularly true in Consumer Credit and Home Finance where we have seen the biggest changes in complaint volumes. Arguably the two sectors most affected by the pandemic and resulting Government initiatives and financial uncertainty, companies operating here have experienced a tumultuous year.

Consumer Credit Firms

What do the complaints stats say?

Overall, consumer credit companies saw a reduction in complaints of 17%, however some niche areas experienced significant growth, and all showed that SLA breaches and uphold rates reached their highest level for 4 years at 48%.

Despite the overall trend, high cost short term lenders saw complaints jump by an astonishing 93% as they bore the brunt of financial uncertainty during the pandemic.

In addition, complaints about debt collection agencies are on the increase again following a drop of 35% in H1 2020, due to forbearance and payment holiday schemes. With debt collection activities picking up again in H2, the usual associated complaints rose alongside, albeit at a slower rate of 4%, still under where they were in 2019. 

A creaking yet vital financial support system

With 9 million of us increasing our borrowing in 2020, the consumer credit market has been at the forefront of supporting those struggling to make ends meet. This need was recognised by both the Government and regulator, and a raft of “emergency” measures and guidance were introduced. These were designed to allow for more understanding and a greater variety of repayment options for consumers struggling , either temporarily or permanently, with income shocks. However, many products in this sector were not designed with such variety in mind. Lenders have had to work quickly to adapt at a time when their own operations were being disrupted as everyone moved to home working.

This constantly shifting landscape over the last year has made things confusing for both businesses and consumers, which has often led to differing expectations and understanding about the type of support and options available.

Throughout it all, businesses also have to balance the needs of the responsible lending and affordability criteria in a landscape when millions more suddenly found themselves financially vulnerable.

The long tail impact of the pandemic was demonstrated by the FCA’s recent report into forbearance which highlighted that 40% of consumers who had taken deferral options from high cost credit firms still needed help once those options came to an end. For both motor finance and credit card/loan providers, this figure was 13%.

Home Finance

What do the complaints stats say?

Home finance saw the biggest jump in complaints figures with a 19% increase in volumes in H2 2020 compared to H1. This covers complaints in relation to mortgage borrowing, equity release, second charges and regulated/unregulated lending.

Timings and SLAs also suffered under this increase as the percentage closed within 3 weeks reduced to 38%, and 8-week breaches rose to 8%.

These figures continue a trend noticeable since H1 2019, which the pandemic has only exacerbated. And with the housing market in boom, activity and performance levels are going to be under greater pressure throughout 2021.

To do-up or to sell-up, that is the question.

Our homes have become even more important to us over the last year, and the amount of time we have spent in them, combined with the opportunities that more flexible working practices offer, has led to considerable activity in the market.

Payment holidays on mortgages were one of the first financial support initiatives announced by the Government at the start of the pandemic. Not controversial on its own (most mortgage products already had these options built in), the confusion over credit score impacts and long-term repayment plans, together with an increase in those struggling to repay at any amount, means the gap in expectation and reality for many consumers revealed these payment holidays were not the ideal solution they were presented as.

EQ Digital Complaints Performance 800X700

As the lockdown continued, 61% of us took to DIY projects large and small to update our homes. Garden projects, home office conversions and loft extensions were how we spent the money we weren’t using for holidays. Whilst this was a boom for builders and DIY firms, for those looking to invest significantly, getting additional funding was not always straightforward.

And for those taking the opportunity to reassess their lifestyles and move home, getting a mortgage could prove challenging. Furlough schemes, a lifeline for many, made getting a new mortgage far more complicated.

In addition, the introduction of the stamp duty holiday has further fuelled the housing market with even greater demands placed on lenders as buyers and sellers rush to beat this deadline.

With the market expected to remain buoyant throughout 2021, it is even more important for home finance lenders to get a handle on the customer engagement and complaints process to prevent a worsening problem as they struggle to meet increased demand.

Top tips to reverse these unwanted trends

Demand for Consumer Credit and Home Finance services are set to remain high as we emerge from lockdown throughout this year. The long-term financial impacts are still only starting to be felt as Government sponsored schemes come to an end and companies are looking for a return to the “old” normal.

Whether credit and loan complaints are rising or falling, companies are clearly struggling with the underlying process of handling their complaints in the timely manner required by the FCA.

How can already busy companies make these changes when their BAU is taking up all their time. The smart ones ask for help. Getting in an external firm to review processes and identify areas for efficiency and beneficial change can make a real difference to day to day running. But where to direct this external help?

At EQ, we often find the challenges lie in three main areas:

  • Process and people optimisation – Is the customer journey as smooth as it could be for both sides? Do the systems you use help rather than hinder? Are your people being used in the right way and do you have enough of them?
  • Communication with customers – How are you managing consumer expectations? What communications channels are you using? Are they fully joined up? Are you doing all you can to identify vulnerable customers and offer them support?
  • Evidence of activity and audit trails - Are you sure the customer has fully understood the implications of a payment holiday or loan? Do you have fully confidence in the advice you give at each stage? How do you evidence this?

Find out more

To discover how EQ’s deep dive customer analytics can help you better understand your customer complaints, visit our Complaints Insights Page.

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