Consumers deserve better.
Earlier last week the FCA’s revised policy on how we strengthen the protections for borrowers in financial difficulty came into force. Everything in the revised guidance makes total sense – drive objective and sustainable solutions for your customers, be consistent, be fair, be clear.
The regulatory bar quite rightly continues to rise.
The prior week, the government unveiled their budget, with the double impact of an increase in the national wage and the increase in employer National Insurance contributions.
Overnight the cost of employing a collection agent in the UK increased by over 10%.
And consumers still deserve better.
There are three key themes that jump off the page – themes that hit hard for consumers, creditors and the regulators alike: Sustainability, Objectivity and Vulnerability. (The temptation to draw this as a venn diagram is very real).
Sustainability
The regulator wants to see sustainability for the consumer, both in terms of the service they are receiving and the impact decisions businesses make have on their consumers. Specifically – how sustainable are the payment arrangements that companies are putting together. Can a consumer afford their priority debts and their other essential living expenses. The regulator also wants to see proof that this is not just implemented, it is embedded in an organization.
Furthermore, we all want to be part of sustainable businesses with healthy margins and a healthy future. For organisations that deal with indebted consumers, they want predictable, manageable costs and want to see sustainable payment arrangements with low levels of breakage.
Objectivity
The regulator wants to see consistency of service – with reasoned judgement on how decisions are made which are absolutely not one size fits all. The bar is high and the starting point with a consumer is varied – having the ability to make consistent, objective and reasoned judgment on acute consumer circumstances is hard to do. It is almost impossible to do it time and time again and always get it right. To be blunt, it is almost impossible to make objective assessments of someone’s affordability, and never get it wrong. But this is precisely what consumers need and deserve.
The conundrum is very real for an organisation that makes it their business to understand a consumers true financial position. This is complex and nuanced. It’s very expensive with lengthy calls and it being increasingly difficult to engage with consumers in the first place. Recruitment, training, development and retention of great agents is an equally big challenge. Furthermore, it’s a double whammy of cost when conversations regarding affordability don’t end in success – the true cost of a broken payment arrangement is far deeper than the cost of not being able to engage with a consumer at all.
Vulnerability
The question of vulnerability continues to get harder to answer. Particularly when the regulator quite rightly demands that the consumer absolutely understands not only their options, but more importantly the best one for their circumstances. Circumstances that are varied, complex, nuanced.
Consumers that don’t want time pressure. I doubt they want to talk to even the best agent that’s newly recruited trying to figure out if it’s £50 or £60 a month they should spend on repaying their debt, when in fact the consumer might not even know what their essential living costs amount to each month.
It’s really difficult for the consumer, and an increasingly impossible task for an organisation to get right every. single. time when they don’t have the limitless funds to employ super humans (that just got 10% more expensive).
The solutions?
My advice 3 years ago was to find, train and coach super humans. And accept the cost of not having them is far greater in than recruiting them in the first place.
The world is different today. We have far greater tooling at our disposal. And the advice is refreshingly different.