In 2010 they published Do the Right Thing, which sets out how they believe creditors can achieve good debt collection practices.1 Following the launch of this report, local and national government agencies, creditors, debt collectors, executors and advisers came together to form the 'Addressing Financial Distress' (AFD) good practice working group. Objective assessment of how much a consumer can pay for their non-priority debts Good practice does not ask consumers to pay more than they can afford.
Preparation
If the person tasked with providing the extra help cannot help until the consumer provides medical documentation, this may prevent that consumer from getting the help they need. In this way, the consumer can explain what help they need and access it directly. Example: South West Water, Wessex Water and Wealden District Council have all developed close working relationships with local advice providers to ensure consumers have access to the help they need, when they need it.
Good practice accepts this and uses information from a range of sources to evaluate, develop and improve.
Part two: Identification
Identifying consumer needs for help Providing the right help to those who ask for it is a key point of good practice. Otherwise, consumers are reluctant to reapply for help or engage with their creditors later. However, not all consumers will ask for help in the same way or through the same channels.
Instead, triggers or indicators can be used to identify when consumers are at risk of financial difficulties and provide them with appropriate support.
Consumers don’t always ask for help or act rationally when
For example, consumers should not have to say “I am in financial trouble” to get the help they need. Example: LloydsTSB has expanded its ability to provide support, not only for overdue customers, but also those newly facing financial difficulties. LloydsTSB encourages its customers to get in touch early as soon as they are aware that they are facing financial difficulties and take advantage of this support.
For creditors with limited access to financial data – such as local authorities, water companies and service providers – missing or partial payments should be seen as a sign of financial difficulty and prompt the offer of assistance.
Identification
Similarly, knowing what advice services are offered by different advice providers is key to ensuring that consumers access the help they need and are not misinformed or sent to an agency that cannot help – as this can frustrate the customer and put them off contacting anyone. again. This information is now on its intranet so that staff can ensure that those who need help are signposted to an organization that can help - if they need face-to-face advice and advocacy and have no income, they are not referred to a telephone advice provider sent, if that provider can only advocate on behalf of consumers who are able to pay more than a certain amount each month. Advisers must also be willing and able to help consumers before they fall into arrears.
If, following such advice, the consumer and/or their adviser makes a settlement offer, creditors should treat it in the same way as any other settlement offer, that is, not refuse to deal with it because the consumer is not yet in arrears.
Part three: Encouragement
Transparent communications describing everything that can happen if payment goes through can be stressful and confusing for consumers, who may feel intimidated by legal processes they don't understand. The reason for the contact and any call-to-action should be prominently stated in the first few lines of text or consumers simply won't read it.
Creditors, advisers and consumers have to work
They are always in plain English and clearly explain why we are writing, what we expect from the customer in response and how the customer can pay.” Since then, Capital One's communications have been known for their quality in two other works — most notably by a debt counselor who works with people with disabilities, who said the clarity helped her and her client a lot. Consumers may receive countless phone calls and letters alerting them that they are in debt, especially if they have multiple creditors. Some consumers with many creditors feel that they are repeatedly told that they are £XX.XX in debt and must either pay or take 'further steps'.
Such contacts will have to mention the consequences of continued non-payment, and these may well be severe.
Encouragement
As with the names discussed in Part One, which promote an open and accessible organizational culture, good practice ensures that creditors accurately and truthfully represent their authority, status and correct legal position when using different trading styles later in the collection cycle. If, after paying for daily necessities, ongoing consumption of water, gas, electricity and other services such as telecommunications, the consumer has no money with which to repay their debts or arrears, it would be good practice to grant them a moratorium, subject to for regular assessments. Contractual arrangements between creditors and third parties acting on their behalf or purchasing their debts can promote good practice.
Otherwise, the process can become time-consuming and expensive for advisers who have to repeat offers of payment, and consumers will face further collection action even if they do the right thing – something that can be off-putting and undermine good practice.
Part four: Cooperation
Preferential debts and essential costs As a general principle, a debt is a priority debt if non-payment results in the loss of the consumer's home, freedom or basic goods and services.17 If the consumer is not late with payments, these items are essential costs. and must be paid in addition to all other types of debt.
Consumers have many financial relationships. To sustain them
This will depend on the stage the recovery case has reached and the consumer's circumstances – for example, they may choose to repay their fuel arrears first to avoid having a prepayment meter fitted. Where possible, consumers should repay their priority debt alongside their current consumption, regular bills and contractual payments. To help them with this, priority creditors could consider accepting reasonable offers for arrears when the consumer can demonstrate that they can also afford their ongoing bills or contractual payments.
In certain circumstances, allow the consumer to pay only the interest on the mortgage or secured loan while they take steps to improve this situation.
Cooperation
The credit provider should then advise the consumer to seek free, independent debt advice or speak directly to other creditors. It has integrated CFS into its internal systems and staff have the time to process the consumer's budget - at a time that suits the consumer. Instead, it should be used as the basis for a sustainable arrangement where the consumer can cover their current living expenses (including any long-term savings strategies) and repay each creditor at a fair and reasonable rate.
This should include consideration of charities that the consumer can turn to for financial assistance.
Part five: Engagement
The basic principle is that consumers are given 30 days without collection activity – such as phone calls and letters – to develop a settlement offer, either on their own or with an adviser. If the consumer is still working on their offer after 30 days, the breathing space commitment in the BBA and FLA Lending Codes, which subscribers must follow, allows the consumer up to a further 30 days of breathing space if they can show that they are taking steps to prepare their offer or gather evidence to support their claim – such as to advance a benefit claim or collect medical evidence. And members of the Credit Services Association (CSA) are required to give consumers a 30-day grace period, only if they are working with a debt counsellor.
If they do not have a good reason to be unwilling to do this, creditors can resume collection activities.
Managing on a restricted budget while repaying debts
Example: When financial problems are discovered, Barclaycard gives consumers 30 days of "breathing space" to address any issues and come up with an affordable repayment offer. Historically, Barclaycard has taken a rather passive approach to breathing space – waiting for a response from the consumer and continuing with normal collection activity if no contact has been made. To overcome this problem, Barclaycard has set up a new proactive customer support team to contact consumers just before the end of the 30 days to see if they are ready to make an offer or need other help - such as further breathing space or a referral to a provider free debt advice.
The amount of money that the consumer has available to repay the debt must be based on an objective assessment of his financial situation.
Engagement
If someone is acting on their behalf, creditors should not insist that the offer be made by the advice agency, unless it is clear that the client cannot afford it, or they are trying to do something that is not in their best interests. good of the consumer. If the consumer has no priority debts, then any available income must be divided fairly among non-priority creditors from the outset. Instead, the consumer will be expected to pay for their continued use and deal with any arrears as a priority debt.
Steps to Minimize Consumer Debt If consumers can see that they are making inroads into their debt, they will be encouraged to stay involved in the repayment process. Creditors who provide overdraft and transactional banking facilities can help by freezing interest and charges on inactive and delinquent accounts and taking a pragmatic approach to active accounts, if they are aware that the consumer is in financial difficulty. Once a consumer has appointed a third party, creditors must always contact that third party in the first instance, once they have been made aware of the third party appointment by the consumer or their adviser.
Citizens Advice Myddelton House
