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Commercial recoveries - dealing with vulnerable customers

Local government debt recovery can be a challenge, legal departments face constant pressures to be both effective debt collectors and be self…

Local government debt recovery can be a challenge, legal departments and internal clients face constant pressures to be both effective debt collectors and be self policing to ensure that increased levels of compliance requirements are met.  A small number of Ombudsman’s decisions have seen a focus on treating customers fairly, mental health policies and vulnerability issues.

Vulnerability and vulnerable customers is a hot topic for all debt recovery professionals and the perception can be that it is an obstacle to effective and efficient debt recovery while also adding additional cost to the process.

In reality however a secure compliant internal and external supplier process can improve collections.

Problems arrive where volume debt recovery processes fail to meet non standard debtors’ needs and vulnerable people slip through the net.

What is important therefore is to ensure that debt recovery processes and staff are able to identify and signpost vulnerable customers to organisations who can assist. It is important to remember that vulnerable customers are not necessarily unable to pay the debt they simply need additional guidance and assistance to facilitate understanding and the mechanics to pay. Some customers may simply need benefit or debt charity advice. Standard processes which do not identify vulnerability will result in reduced recovery rates and potential complaints with potentially serious repercussions.

Remember that we are not rescuers and cannot solve the customers’ problems but if we build good relationships with the advice sector and debt charities and train our staff we can direct the individuals to people who can help. By helping the vulnerable person gain help we improve our organisation and recovery rates.

It is important firstly to identify what is deemed to be a vulnerable customer. It can be a very wide definition. The Children’s Society in their report “The Wolf At The Door” looks at the effect of council tax debt recovery processes have on the children of the family in debt and broadly defines a vulnerable customer as families with children. The report sets out recommendation for local authorities dealing with families with children in council tax debt.

The Financial Conduct Authority defines a vulnerable consumer as someone who, due to their personal circumstances is especially susceptible to detriment. They qualify this by saying that the most significant detriment occurs when people through the use of credit get themselves into an unmanageable or problem debt.

MALG (Money Advice Liaison Group) have set down good practice guidelines for dealing with consumers with mental health conditions the most recent and third edition published in 2015. The guidelines set out best practice for dealing with the management of debt when a consumer with a mental health condition is in debt.

Vulnerability is not always permanent; a customer can be vulnerable if for reasons of age, health, disability or severe financial security they find themselves unable to secure their personal welfare or that of members of their family and their dependants. A person can be vulnerable if they have difficulties understanding or communicating due to language barriers, learning difficulties, mental capacity or confusion.

Inability to communicate effectively is possibly the most important characteristic of vulnerability. Vulnerability can be caused by a number of temporary personal circumstances or permanent characteristics from bereavement, domestic violence or separation to permanent disability or mental health illness.

What is essential is that creditors make every effort to capture any information which may indicate vulnerability, record the case as such and direct the individual to an appropriate 3rd party where appropriate or adapt the recovery process to offer extra assistance. By doing this the organisation satisfies all regulatory issues, behaves in a reasonable way which is fair and allows more resources to be directed to non vulnerable accounts.

Where vulnerability issues are raised it is useful for staff to make a short assessment which will affect the way the account is handled. The assessment should look how the vulnerability affects the customer, is it temporary or permanent, are they getting any help. This will allow the case to be dealt with appropriately. For example a customer may contact the organisation and say they have broken their leg and are receiving only sick pay but will return to work on full pay in 8 weeks. This is a temporary situation causing the customer hardship thus putting them in a vulnerable situation. It may be appropriate to suspend action for 8 weeks or agree a reduced payment for that period. The important thing is to maintain good clear open communication with the customer and to demonstrate fairness so that when the situation improves the customer feels engaged with you and will increase payments as soon as is possible. It is not a failure to miss a vulnerable case where there are no indicators but it is a serious failing if we do not have processes to deal with them when they are identified.

Remember that no two vulnerability cases are the same and do not require the same level of action. If however you have well informed flexible staff supported by good clear policies the vulnerability cases will not impact on your business and will allow you to focus on your main objective of recovering unpaid revenue.

External legal suppliers can assist government bodies with compliance by providing a full compliant process which from the start of the process both supports what has been done by the client to date but also offers a platform to identify previously missed vulnerable issues or offers the security of a process which is audit compliant. The process cannot ever be 100% secure as someone may simply not communicate with the creditor but it will demonstrate that every reasonable effort has been made to identify their vulnerability issues.

So what is best practice?

Organisations dealing with the collection of debt should demonstrate best practice and have the following policies:-

  1. Treating customers fairly (TCF)
  2. Mental health
  3. Vulnerable debtors
  4. Complaints

Staff should be trained in all areas and all debt recovery letters sent to customers should be compliant. The letters must offer good clear open communication and notify the customer of organisations which can offer assistance such as debt charities. It can be useful for the creditor to enter a partnership with a debt charity so that they can offer simpler direct access to free advice.

Where you do not have policies and training in place, every debt claim can be a potential vulnerability complaint. Spend time developing your staff and creating clear policies which will give you the security of being able to engage with your customers and so maximise recoveries.

For advice on writing vulnerability policies or any training requirements please contact Patrick Raywood on 0113 213 4040 or at

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