UK Finance, the trade association for banks and finance providers, recently held a podcast entitled ‘Debt collection and vulnerability – past, present & future’.

The first point covered was that debt leads to additional problems and vulnerability, e.g. mental health issues.

The podcast presenter commented that CONC 7.2.3 in the FCA included a reference as to where firms might find examples of good practice in this area. CONC 7.2.3 says:

“Firms may wish to have regard to the principles outlined in the Money Advice Liaison Group (MALG) Guidelines “Good Practice Awareness Guidelines for Consumers with Mental Health Problems and Debt”.

Many firms have a dedicated vulnerable customer team, who have received additional training, and it is common for the vulnerable customer team to operate as part of the firm’s collections department.

When considering how to treat vulnerable customers, staff in credit firms were urged to consider if they would be happy with their own parent or grandparent being treated in this way.

Some people remain reluctant to explain their situation, perhaps because they think it’s all their own fault, or that nothing can be done to help them. It was acknowledged that firms can’t respond to vulnerabilities if the customer doesn’t show any signs of vulnerability.

Anyone who is in financial difficulty could be vulnerable, so this could mean that everyone who is in contact with a collections department is vulnerable.

Customers could come in and out of vulnerable status several times during their lifetime, so they may be vulnerable at some stages of their relationship with a firm and not vulnerable at other times. Some people’s vulnerability may increase over the period they deal with a firm, e.g. mental and physical illnesses getting worse.

Society is getting older and sometimes people have debts in their eighties, so the vulnerability of the population as a whole is increasing. The high levels of household debt; the rise of ‘zero hours’, the ‘gig economy’ and other uncertain income arrangements; and the increase in the number of people with a gambling problem should all result in an increase the number of vulnerable people.

Firms were advised to check if potentially vulnerable individuals have a preference as to how they should be contacted, e.g. some may find it hard to communicate verbally or to write a letter. The more communication channels a firm offers, the easier it is for a vulnerable customer to find a method that suits them.

Lenders who carry out detailed expenditure analysis should consider whether the expenditure figures obtained from the customer indicate vulnerability, e.g. a large spend on medical costs. Evidence of gambling on bank statements is perhaps a more obvious indicator of vulnerability.

It can sometimes be difficult to get vulnerable people to understand that they may have to pay both their contractual amount and an extra amount to clear their arrears.

It may sometimes be necessary to write off a loan even if it was appropriate for the lender to approve an application at the time. This might be if the amount the customer can afford each month is so low that it would take an unreasonably long time to clear the debt. One of the podcast panellists asked if it was appropriate to accept token payments when the firm strongly suspects that the customer’s finances will not improve over the next 12 months, 36 months etc.

Income and expenditure plans need to be regularly reviewed, and how often these are reviewed should depend on the individual customer’s circumstances.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article