[INSIGHTS]: Mixed messages – Why creditor communications to people in financial difficulty need to offer a clearer, better route to help

External Links:

https://www.stepchange.org/Portals/0/assets/pdf/2022/policy/mixed-messages-summary-report-2022.pdf

Summary

This report discussed creditor communications and financial difficulties. It highlights the importance of clear and effective communication for people struggling with debt. The report includes findings from a survey of StepChange clients and three focus groups, as well as insights on the impact of legislation and regulations on creditor communications.

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Key Points

Successful engagement with consumers in financial difficulties requires dialogue and pro-active contact by creditors.
Communications should focus on helping people resolve their situation, rather than on helping the firm resolve its default rate.
Communications that recognize the emotional impact of problem debt on individuals and are sympathetic to their situation are more effective.
Organizations should consistently act on disclosures of vulnerability and tailor their communications to meet the needs of diverse people.
Automated creditor letters can be confusing and unnecessary, leading to contact from consumers that is not required and reduces organizational efficiency.
The legalistic language required by legislation and the presentation of this disempowers rather than protects people in financial difficulty.
StepChange clients have around 5 debts on average and not all of these are FCA regulated.
Other sector regulations, firms, and public sector bodies with debt recovery functions should take note of this report’s findings and consider how similar recommendations might apply in their areas.
The FCA’s Consumer Duty requires firms to consider the effectiveness of their communications in helping people achieve their financial objectives.
This report highlights people’s lived experience of financial difficulties and raises questions about the purpose of communications to people in financial difficulty and the quality of outcomes they deliver for them.
The experiences highlighted in this report should inform further steps by government, industry, and regulators to improve consumer outcomes.

Key Take Aways

Creditors should focus on helping people resolve their situation, rather than on helping the firm resolve its default rate.
Communications should recognize the emotional impact of problem debt on individuals and be sympathetic to their situation.
Organizations should consistently act on disclosures of vulnerability and tailor their communications to meet the needs of diverse people.
Automated creditor letters can be confusing and unnecessary, leading to contact from consumers that is not required and reduces organizational efficiency.
The legalistic language required by legislation and the presentation of this disempowers rather than protects people in financial difficulty.
Other sector regulations, firms, and public sector bodies with debt recovery functions should take note of this report’s findings and consider how similar recommendations might apply in their areas.
The FCA’s Consumer Duty requires firms to consider the effectiveness of their communications in helping people achieve their financial objectives.
The credit information system is not spotting people with underlying financial difficulty using inappropriate coping mechanisms that lead to harm.
The treatment of forbearance is punitive, such that consumers perceive their credit scores to be more important than getting help with their debts, even when their coping strategies to deal with financial difficulty are harmful.
The experiences highlighted in this report should inform further steps by government, industry, and regulators to improve consumer outcomes.
The report highlights the importance of clear and effective communication for people struggling with debt.
Successful engagement with consumers in financial difficulties requires dialogue and pro-active contact by creditors.
The experiences of people in financial difficulty raise questions about the purpose of communications to them and the quality of outcomes they deliver.
Communications should focus on helping people resolve their situation, rather than on helping the firm resolve its default rate.
Organizations should consistently act on disclosures of vulnerability and tailor their communications to meet the needs of diverse people.
The experiences highlighted in this report should inform further steps by government, industry, and regulators to improve consumer outcomes.

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