Alan J. Smith, Chair of the High Court Enforcement Officers Association, looks at how the enforcement profession is working with the debt advice sector to recognise vulnerability in debtors.
The recent cost-of-living increases continue to impact us all, but none more so than those with lower incomes, where the combined impact of energy, fuel and food price inflation is taking a disproportionately large share of people’s income.
The vulnerable are being hit hard: wages are not rising to match inflation and pensions and disability benefits even less so. Financial pressures will only get worse, as people turn to credit cards, payday loans and overdrafts just to survive.
According to the Financial Conduct Authority’s survey in 2020, around 53% of UK adults display some degree of vulnerability. However, vulnerability is never a static state of affairs. People can be pushed into it through new circumstances such as the loss of their job, ill-health or bereavement.
These figures are likely to have gone up over the last two years and will continue to do so. The Office of National Statistics’ data shows an increase of 17% of people who were finding it difficult or very difficult to pay their household bills between November 2021 and March 2022, with the latest figures showing 23% fall into this category.
Citizens Advice says that, should the energy price cap go up in October (which is looking more like a certainty), one in four people will be unable to pay their energy bills. Over the last year alone, they have referred 44% more people to foodbanks.
This increase in vulnerability, coupled with a reduction in debtors’ ability to pay, will impact on credit management and enforcement for some time to come.
The credit management and enforcement professions cannot rely on the debt advice sector to manage this growing wave of vulnerability alone. They will be put under huge pressure over the coming months, perhaps years, by requests for help.
So, what is the enforcement profession doing to help identify and support vulnerable debtors?
Whilst the enforcement industry supports vulnerable debtors well, now is the time to make sure that the systems in place are robust enough to deal with the anticipated significant increase in vulnerability.
Firstly, training all staff, not just enforcement agents, to quickly recognise the signs of vulnerability and know what the next steps are is paramount. Identifying if someone could be a vulnerable debtor from the first stages of contact will help to manage sympathetic enforcement activity that is tailored to the debtor’s circumstances. This will help agents to put payment plans in place, or make any necessary referrals, which will stop fees and charges from escalating.
Secondly, we are working ever more closely with our clients to ensure that their specific Treating Customers Fairly (TCF) policies are incorporated into enforcement practices. This includes regular contact to discuss internal policies to ensure they are aligned for any cases that reach enforcement stages. Having robust TCF policies in place will ensure that customers are provided with clear information, suitable advice and are kept appropriately informed consistently from the point of purchase to the time any enforcement activity is concluded.
Thirdly, given the dynamic nature of vulnerability, we are getting better at gathering more and better data and analysing it intelligently to support decision making, as well as using technology, such as AI, to pick up indications of vulnerability through customer support. This can help with identifying risks and offering support from the outset, automating customer portals to make payment easier and more convenient, and even analysing common objections to recommend the most appropriate course of action.
There isn’t a one size fits all approach to enforcement. But, by working closely with the debt advice sector and other credit management agencies, Enforcement Agents can ensure that vulnerable people are supported with flexibility and sympathy while we work with them to create appropriate resolutions.