Credit, Collections & Insolvency News
A perfect storm of inflation, increased energy costs, and the impact of interest rate and tax rises is contributing to what is being widely referred to as the cost of living crisis. Charities have said that the real term cost on customers is pushing many into serious financial difficulties and some even risk homelessness. Banks, lenders, and the wider financial services sector should consider what can be done to mitigate the risk of customer harm. We will now look at some key elements that could impact how firms support customers during this challenging time.
Reporting
It is important that management information (MI) captures potential triggers or data points that show how the firm is supporting customers during the cost of living crisis. These will likely relate to financial difficulty and the support offered to customers in pre-arrears or collections. However, there may be new data points available that could shed light on customer outcomes. These could include, for example, whether customers that firms know are in receipt of benefit payments are entering difficulties more frequently than was the case twelve months ago. If so, steps should be taken to investigate why and what could be done to mitigate this.
Training
Firms should regularly review their training to ensure that it reflects the relevant policy and process, is delivered in a timely and recorded manner, and is in the most effective format. At a time where cases of financial difficulty may rise due to the cost of living, it is vital for firms to have confidence in the training their staff receive.
Training needs to be subject to good governance practices so that there are records of what training has been delivered and who received it. In a period of hybrid-working, with some in the office and other colleagues at home, firms must make sure that all staff are receiving the training they need regardless of their location.
Income and expenditure assessments (I&Es)
I&Es are a crucial step in establishing affordability when discussing options for those in financial difficulties. They will be an important tool when working with customers negatively impacted by the cost of living crisis. I&Es are not easy to do and require both diligence on the part of the adviser and honesty and engagement on the behalf of the customer. For this to happen, firms should focus in on how I&Es are conducted to ensure they are being delivered in the best possible manner. Because of the high risk of detriment if I&Es are completed inaccurately, firms should target quality assurance checks in this area.
Signposting
By signposting to relevant third-party organisations, firms can improve the likelihood of customers getting the help they need. This is important especially when the concerns of the customer go beyond the scope or expertise of the firm. Firms should consider whether there are additional organisations that could be used for signposting during the cost of living crisis. For example, it is possible that customers are affected by increases in their energy costs. It could be valuable to have information available to staff that explains who can assist with energy price concerns to provide customers with the most pertinent support. For example, Ofgem has a page that explains to customers how to get help from energy providers and the rights available to them.
Employee support
First line staff and other colleagues do not live in a bubble but are impacted by the same events as customers. This means that as firms think about how to adapt their services to mitigate the risk of customer harm, similar thought should be given to staff. There are many ways to do this, including having open communication and information available to staff about the help that is at hand. This may be internal support structures (for example, employee or in-house support groups) or external organisations. Such measures can improve staff wellbeing, increase retention, and mean that the most skilled staff are available to deliver good outcomes.
