The Public Sector is failing debtors, especially the most vulnerable, and needs to urgently learn the lessons from the private sector according to the Chartered Institute of Credit Management (CICM).

The concept of ‘vulnerability’ is also too vague, and as such many of those most in need of help are falling between the cracks.

The CICM also has the view that the concept of ‘vulnerability’ is also too vague, and as such many of those most in need of help are falling between the cracks. The views are part of the CICM’s response to the Cabinet Office Call for Evidence on the issue of government debt management, the process of recovering public sector debt.

The CICM, whose members include senior executive across both the public and private sectors, says that best practice should be followed across all aspects of debt recovery and collections, regardless of how the debt originated:

Sue Chapple, CICM Chief Executive said “It seems wholly wrong that when the government assesses affordability, it does so in order to recover what’s owed within a specific time period and by instalments, and that cannot be in the best interests of the consumer.”

“When private debt collection agencies seek to recover consumer debt (e.g credit card debts, phone debts, utility debts etc), however, it is simply about what the customer can afford to pay, without a time restriction, and that is much fairer on the customer.”

“The public sector is also able to take money from an individual’s earnings, without the need for Court Proceedings, and that seems similarly unfair. Individuals who are in debt should receive the same level of treatment, and fairness, regardless of who they owe money to. Debt collection practices need to be much more aligned.”

Chapple says that what is of greater concern, is the public sector’s inconsistent approach to vulnerability“The fundamental definition of vulnerability is too vague. A vulnerability assessment should recognise and support individuals who may be unable to safeguard their personal welfare. Vulnerability can be permanent, temporary or transient, and only by truly understanding the customer can you know how vulnerable they are. It is not just about looking at their finances.”

This inconsistency extends across government departments: “Vulnerabilities identified at local government level should be shared across other departments, as the individual is unlikely to realise that they may need to notify different parts of government of their situation,” she adds.

The best way of identifying and supporting the vulnerable is to adopt the processes and procedures used by members of the Credit Services Association (CSA) who follow a strict Code of Practice: “Behavioural insights and thoroughly assessing the best option for support is key. Each case is unique and should be treated as such when assessing the best support that can be provided.”

Communication, she says, is also key, and that customers need to be reached in different ways: “Everyone has their own preference – for example, speaking on the phone, accessing information online, or using an app. We should stop talking about customers being ‘hounded’ on the phone or by text when actually that could be the best way to engage with them. That said, communication needs to be open and encouraging in order to minimise any mental impact on those in problem debt.”

“Whereas best practice can support people in debt,  poor practice can do terrible damage.”

“CICM members commented that poor debt management activity could prolong or increase the vulnerability,” she says. “Impacts could include mental health issues, suicide, alcoholism/drug abuse, domestic abuse.”

“Poor debt management could also prolong the amount of time someone is in debt and damage the relationship the individual has in the future with creditor organisations.”