22-28th of March marked the UK’s Debt Awareness week and the 12-month anniversary of the first UK lockdown.
22-28th of March marked the UK’s Debt Awareness week and also the 12-month anniversary of the first UK lockdown. Debt Awareness Week is a drive to destigmatise debt and help people to have open conversations around their finances in order to get back on track.
The Citizens Advice Bureau is warning that debt will be a serious problem left behind by the pandemic. The uncertain economic climate created by COVID-19 has already adversely affected millions of people and we still do not know what the long-term effects will look like.
All of this meant that Debt Awareness Week was very different this year, with a focus on the impact from the pandemic. Namely the significant increase in those who are struggling with debt due to the continued effect on jobs and industries and helping them learn how to navigate this new financial landscape, as well making employers and large companies more aware of their responsibilities towards their customers and employees to help them through this difficult period.
Debt crisis as a result of COVID-19
The Citizens Advice Bureau have been feeling the impact of the pandemic, having had to switch their advice format to mainly telephone calls at a time when there has been a huge increase is people’s feelings of anxiety, fear, and depression around their financial situations. They’ve shared that their analysis of complex debt clients has revealed that 2 in 5 people have no money left at all at the end of the month after meeting their basic living costs.
Many people have experienced a significant drop in their income during the past year, making meeting these basic living costs even more difficult. This means that the number of people reaching out for help with their finances is on the rise, many of whom have not been in this position before. This puts extra pressure on the services in place, increasing demand on businesses like energy providers. Businesses must now more than ever, ensure that they are clear and compassionate when communicating with customers throughout their debt collection process.
The reaction of the collections industry
The collections industry has seen a corresponding rise in activity with the pandemic, with more people moving into the industry in 2021 than every before. There has also been a significant drive from UK debt collectors to get involved in minimising losses taxpayer money invested in small businesses as part of the £44 billion business rescue programme. The government offered 100% guarantees on loans to small businesses in an attempt to encourage banks to lend to them. However, the protracted nature of the lockdown has meant that many of these businesses are still failing and will be forced to default on their loans. With the British taxpayer footing the bill.
The role of energy companies in managing the debt crisis
The pandemic has also financially impacted energy suppliers. Many were already undergoing major restructures, and the impact of the pandemic has accelerated changes to their service which can cause payment delays as customers struggle to adjust to new systems.
It is crucial for energy suppliers to carefully consider their communications at this time. The most important thing that a business can do to help their customers at this time is to create clear messaging to their customers and ensure that there are simple steps in place to help them manage their account in a way that works for them. This could include support measures such as extended payment holidays or temporary prepaid credit for those in desperate need.
An estimated 2.1 million households are currently behind on their energy bills and a quarter of all energy customers worried that they won’t be able to pay their bill this winter, making customer service and support more important than ever before. However, the return of debt problems will continue to cause friction for businesses as customers are unable to meet their bills on time, placing a strain on their cash flow.
During the pandemic, the Government and the energy industry have put in place significant measures to support people’s incomes and help those struggling with their bills, which has made a difference to many households. However, increased demand has meant that many people have been left unable to access this support.
Many energy customers feel pressured and uncomfortable with talking about overdue bills on the phone. This means that being able to offer a self-service, digital triage solution that allows customers to interact with your business in different ways, can really make a difference when it comes to reconciling payments. Allowing customers to get in touch in the way that works for them, be that a text message, email or by logging in to a dedicated platform, really empowers them to be in control and removes any awkwardness they may feel in discussing their account. This is good for the customer, as it puts them back in control, and also benefits the business by opening communications with their struggling customers and increasing the rates of payment.
What happens next?
Energy suppliers will need to provide additional support throughout the remainder of the pandemic and beyond, and continually improve how they communicate to customers. Putting preventative measures in place, whereby suppliers are proactively communicating with customers to help prevent them getting into debt in the first place, will help to alleviate the pressure of mounting debts for both parties.
In the long term, the Government will need take a coordinated, cross-sector approach to deal with the impacts of debts that have built up during the pandemic. It will be interesting to see how the Government will look to provide adequate support for consumers in the coming months, and whether additional funding or targeted financial support for those more at risk might come into play. Whatever the outcome, now is the time that businesses, more than ever, need to support their customers when it comes to their debt collection processes.