Ensuring fairness to debt owners as well as customers

21 November 2022

Much is made of Treating Customers Fairly; it is a principle that predates the Financial Conduct Authority (FCA), having been introduced by the Financial Services Authority (FSA) in 2006.  

But who is looking out for the people to whom the money is owed? And can fairness to customers coexist with fairness to clients? Read on to find out.


Why debts proceed to enforcement

Debt is the product of an incomplete transaction; it requires everyone involved in the transaction to take part and bring the transaction to a close.

We know there are many reasons why customers do not engage, including a lack of understanding of the options, fear, over-optimism, or belligerent refusal.

Data science and analytics can give us a good indication of the underlying cause, but the best approximation of the truth will only be achieved through a skilled agent on the phone or the doorstep.

At its heart, debt is not about numbers, it is about people, behaviours, and circumstances. An agent who can strike up a rapport with a broad range of personalities is our best chance of resolving a difficult debt.

Sometimes, despite our best efforts, it is impossible to engage the customer remotely and a visit to the address is the next best action.


Achieving the win-win-win-win

The critical success factor is balance. Skewed too far in favour of any given party, the other can feel marginalised and may then act in a way that hinders resolution. Yet this goes beyond just the client and the customer.

A truly balanced approach will take account of fairness to the:

  • Customer – by accurately assessing propensity to pay with either cash or assets, and by considering affordability and vulnerability.
  • Client – by ensuring there is no damage to the client’s reputation through overzealous collection practices. This does not negate our duty to prevent the customer from falling deeper into financial difficulty through non-payment; we can lift them out of the burden of debt through sustainable repayment plans.
  • Supplier – by ensuring fair incentives that do not drive the wrong behaviours.
  • People who pay on time every day – by taking a proportionate approach to those who do not pay. People who pay their dues expect those who do not to be pursued. Failure to do so can create a behavioural disincentive for otherwise prompt payers.

This holistic approach to fair debt outcomes for all is the way in which fairness to debt owners is best achieved.


How to get it right

This is all great theory, but how can it actually be implemented in the real world? There are a number of options:

  1. Data science and analytics

Sometimes, the best data is the data that you already hold, it just needs to be used in the right way. Once that is done, a decision can be made on whether external data sources are needed (for example, financial indicators, evidence of vulnerability, or contact information).

If you use a panel of suppliers, significant gains can be made by having a skilled Managed Service Provider (MSP) that provides expertly analysed data to all suppliers. This sets a baseline standard for data and removes variations in the capability levels of each supplier.

  1. Communication

Providing the right channels – portal, social media messaging, voice, etc makes customer engagement easier to achieve.

The tone of communication is important. This can be supplemented through dynamic next best action codes that tailor the tone and channel of communication based on analytics and customer behaviour.

Behavioural science, far from being the niche Nudge Unit that was spawned in No. 10 over a decade ago, is now mainstream and can be incorporated with ease.

  1. Continuous improvement

Dynamic strategies can be improved through machine-learning that feeds improved outcome data back into the decision engine.

Benchmarking and standardising best practice across all suppliers is another area where it is helpful to take an integrated approach through an MSP.

  1. Plug-in services

The provision of plug-in services, such as income maximisation, can increase customers’ disposable incomes, resulting in more people being able to repay and at a faster rate.

Debt can be both a cause and a symptom of other problems. Signposting to specialist organisations and providing a breathing space for people to access help can yield better outcomes. Not only can it help the client to get paid, but it also helps our agents who are not qualified to deal with some of the trickier aspects of the human condition.


Not sure where to start?

Just believes that you deserve to get paid, but not at any cost. With that in mind, we have embedded income maximisation into our customer journey to make sure that people are in the best financial position possible to make an affordable repayment plan.

By applying market integration to the enforcement industry, Just has been able to leverage data and deliver improved outcomes for both customers and clients.

Please get in touch if you’d like to discuss your current and emerging challenges.

Steve Coppard
Group Director of Debt Policy and Strategy
Just and Arum