“Nearly 13 million people have already been unable to pay, or expect to be unable to pay, at least one bill because of the coronavirus outbreak. Of these, almost 11 million have missed or expect to miss a bill that would leave them vulnerable to severe consequences” – Citizens Advice Bureau, 1 May 2020
As many of us in the credit industry are already aware, coronavirus is having a profound impact across a huge number of UK households. Unprecedented steps have been taken to offer short-term relief, but even this could be adding to the long-term impacts we will undoubtedly face.
Payment holidays for secured and unsecured debts will provide much-needed respite, but this can only be for so long and we must start to look at how the credit industry is prepared to manage the potential bubble of people that could find themselves financially vulnerable once the expectation of payments returns.
Not since the financial crisis has an effective and scalable credit strategy been so key to our industry.
In this blog, I look at some of the key questions that creditors should be asking themselves to ensure they are ready for any sudden increase in financial hardship.
- How does my pre-arrears strategy prevent customers from falling behind?
Whilst payments holidays are one way of preventing customers falling into arrears, there are other methods (such as refinancing) that may help customers reduce their outgoings and avoid falling behind with payment. Many providers offer this already and a review of criteria to ensure this service can be offered where appropriate should be adopted.
- How will my collections operation absorb any sudden increase?
With a sudden increase in customer volume, inevitably follows increased call, correspondence, and back-office processing volumes. Is your current business agile enough to absorb and increase or will the service offered be negatively impacted should this happen?
- How can technology be utilised to support our customers?
There is an amazing amount of technology available that can really help you to support your customers, but it can often be underutilised. Is your business up to date with technology? Do you need to upgrade existing systems, or implement a new system altogether?
- How does the overall credit strategy need to change to remain compliant?
Ensuring that the treatments available to customers are compliant and appropriate is key, and the ability to identify things like vulnerability and long-term financial hardship will mean we can treat all customers fairly. Are your existing treatment options the best they can be?
- Most importantly, do all the above ensure that we can help people recover from potentially the toughest financial crisis they have faced?
If the answer to this is anything other than an absolute yes, let’s have a chat and see how we can help.
To gain further insight into COIVD-19 exit strategy, download our free playbook.
Arum is the only truly independent company offering services across the credit management lifecycle. All our consultants have the ability to work remotely, so we can continue to offer our exceptionally high level of service during this challenging time.