Debt Recovery post initial COVID-19 crisis: A MALG Interview with Richard Haymes
Our very own Richard Haymes, was interviewed recently by Bob Winnington, CEO of the Money Advice Liaison Group (MALG), where he was asked to speak on the topic of Debt Recovery post initial COVID-19 crisis’, as part of a MALG members meeting.
As with most recent events, this was held virtually with Bob, channelling his inner Jeremy Paxman over Zoom, posing a number of questions on key topics around debt recovery post the initial COVID-19 crisis
Here’s what Richard had to say during this interview:
How has Indesser and its supply chain of Debt collection Agencies (DCAs) responded to the initial crisis?
Our focus around lockdown was to support our people making sure that they were safe, supported and could migrate to a home working model. Like many organisations this saw a huge acceleration of tech rollout so that we could robustly accommodate an increased number of home workers. For our supply chain we worked with them to make sure that they could also move to a home working model with great flexibility shown by all in adapting to new ways of working, adopting new security standards and being flexible. We would like to sincerely thank all in our supply chain for remaining focused on consumers, clients and change during such a difficult time.
The approach to debt collection did change with the majority of our clients pausing the placement of new debt as they focused on supporting their customers in other areas like delivering benefits and support schemes. Customers on payment arrangements were supported to make sure that they were still appropriate. We offered our support for our supply chain to make use of government support schemes like furlough due to the impact of reduced activity.
So now we are all figuring out a new world. For those who have been directly impacted (and so many have), some maybe home schooling, have increased carer responsibility, have lost income or have already been made redundant. Many have been dealing with a multitude of social issues such as isolation, reduced mobility and loneliness too.
Our lives are different and will likely continue to be very different for some time to come, so we all need to continue to be compassionate, flexible and understand that everyone is processing these changes at different speeds.
How do you think consumer behaviour has changed?
The initial crisis has cast a bright light on the existing inequality. Those most vulnerable / who are least financially resilient before the crisis have been even more greatly impacted. There is a huge amount of information available, almost on a daily basis, from trusted organisations like StepChange Debt Charity, Money Advice Trust, and The Bank of England, which can all provide a view on how people are being impacted. What is clear is that the people’s ability to manage their debts) will continue to change:
- Initial protections provided by the government have reduced the impact of household costs, job losses /underemployment etc.
- Affordability will move through the population as different people are impacted at different times with those financially less resilient moving into problem debt sooner.
- My belief is that the peak of the impact on consumer problem debt will not be seen until September 2022.
- We are also seeing data points that at first glance are counter intuitive – UK households repaid a record £7.4bn of consumer credit in April1, the first full month of lockdown but reflect the different responses people will take to their own affordability, in this case paying down debts whilst affordability is possible.
- And the converse of this being research from StepChange Debt Charity, which suggests that around a quarter of all households have been negatively affected financially, and that £6bn of debt directly attributed to the pandemic has been built up among 4m people2.
What will debt recovery look like after COVID-19?
As a result of reduced debt collection activity, support schemes like furlough and forbearance/payment holidays put in place by financial services firms covering loans, credit cards, mortgages and motor financehas eased the short term pressure on consumers has been eased. This can be seen in the fall in new Individual Voluntary Arrangements (IVAs) of circa 40% on pre-COVID levels and reduced demand for debt advice.
However, we are just at the start of a debt tsunami - the need and volume of problem will build quickly over the next few years. This will lead to a supply crunch as creditors of all types and their supply chain of DCAs will take time to build the capacity to meet the demand. In these difficult times the focus on supporting the financially vulnerable will be even more important.
So what can public sector organisations and creditors do??
Well one key area is data, data, data – all involved in helping their customers manage problem debt need to use the available data to make educated decisions on their customers and to pro-actively identify and support those that are financially vulnerable – taking appropriate action focused on debt resolution.
We would like to thank Bob and the team for the opportunity join the MALG members meeting on July 9. You can find more details about MALG here./
To find out more about how Indesser have been developing how we help our customers during the lockdown, read Oli Vogel's blog: Responding to COVID-19 – Rapid innovation to deliver better outcomes
1 Source: Bank of England Money and Credit – April 2020 Statistical release 02-06-20
2 Source: Stepchange Coronavirus and personal debt: a financial recovery strategy for households report – June 2020