Credit Services Association (CSA) Guest Blog
Adapting for Recovery: credit and collections beyond the pandemic
The COVID pandemic has taken its dreadful toll throughout 2020, knocking back industries where physical interaction has been an integral feature. Financial services – like many other services sectors – have managed to cope in operational terms, migrating swiftly to online and home-working, possibly changing the nature of these businesses for the longer term. But financial services, credit and recoveries are a facility serving the real world, and the ripples from an impaired economy will eventually affect it.
The enforced closure of businesses and locking down of the economy has forced massive government interventions – furlough, welfare support, delayed tax payments - and enhanced forbearance requirements and payment deferrals across credit services. The CSA and our members have been fully supportive of the need for greater understanding and forbearance especially for those adversely affected by the pandemic. Fundamentally the regulatory and market framework is designed to show flexibility and sensitivity to changing customer circumstances. Yet there will be a need to move from recent short-term interventions to settled long-term operating before long.
As the country recovers from the pandemic, the specialist skills of collection agencies will be needed more than ever. Although government interventions have helped incomes remain relatively protected through the peak of the crisis, at some point this will taper out, and sadly it is likely that redundancies will rise and disposable incomes will be squeezed. As we move into this new phase, creditors including those in the public sector, will need to show sensitivity and not automatically resort straight to court action and enforcement processes. At the CSA, we hope there will be a wider recognition of the value of engagement with customers in financial difficulty, of maintaining dialogue and helping find fair, tailored solutions based on individual circumstances wherever possible.
While the payment deferrals mandated by regulators have had their impact, these are obligations that are delayed, not cancelled. As regulators themselves have pointed out, if a customer can afford to re-start payments, even if in a small amount, it is most often in their best interests to do so. The collections industry has long taken a ‘breathing space’ approach for those who require time to access debt advice and for the most vulnerable in society, and will continue to offer forbearance as good practice. It is not in anyone’s interests to pursue debt repayments unrealistically and where individuals simply have no means to pay – there are always other options to resolving problems and advice should be available to customers in those circumstances.
Normalising collections that are tailored to affordability must be part of the road to recovery. Policy-makers must also recognise that the tone and content of communication at the outset can shape the relationship going forward. Private sector collections, both creditor and collection agents, have become used to refining communications on a near continuous basis. It is to be hoped that pre-defined communications across other sectors can be improved and made to fit personal circumstances more accurately.
The credit-collections ‘eco-system’ in many ways represents the unsung plumbing of our economy, because transactions between businesses and individuals – or between businesses themselves – depend on payment being honoured and completed in as timely and full manner as possible. Thousands of SMEs need their bills to be paid for their goods and services. Ensuring loans are repaid helps to keep the cost of credit lower for all, as well as the costs of products and services themselves.
Credit is a crucial utility in today’s economy and will be vital in helping households get back on their feet as we all get back to more normal routines and business cycles. Professional collection practices, engaging well with customers, are a vital component in this economic recovery. Credit services have shown an ability to adapt to the needs of the community, and going forward it is now clear that safeguarding fair and well-functioning credit markets will be more important than ever.
Written for Indesser by CSA Chief Executive, Chris Leslie.