As a child growing up in the eighties, I remember the dread in the house when the mortgage statement dropped through the letterbox. I didn’t know what a mortgage was, but it was a loaded and frightening word, and I saw the effect it had on my parents, who must have been paying something like 15% interest at the time.
Younger people have not lived through periods of high interest rates, and have not experienced what they can do to your monthly finances – yet. This is going to be a grim winter for many, and for some it will be the first time they find themselves in financial distress.
Worry about bills can affect everyone, but there are times when, due to a life event, low resilience, low capability or a health issue, a person can become financially vulnerable.
The FCA defines a vulnerable person as “someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm doesn’t act with appropriate levels of care”. They conducted research a few years ago (https://www.fca.org.uk/publication/research/vulnerability-exposed-research.pdf) and identified five practices by lenders that caused particular problems for people in this state. They were:
1) Failure to provide clear explanations;
2) Inappropriate and predatory sales behaviours;
3) Technological innovation and digital exclusion;
4) Poor frontline interaction; and
5) Rigid product design and service structures.
To avoid these issues, lenders need to inform their customers, clearly, as to what is going on and what their options are when they’re facing difficulty. They need to develop a clear and compassionate collections policy, train their front line people, including on how to spot vulnerability, and they need the systems to ensure these customers are appropriately flagged, tracked and supported. Now would be a great time to review and refresh those policies and procedures to ensure they are up to scratch.
I do write more about this in my book, but that’s not really the point of this post. The point is, the coming winter will test us all. As financial services professionals, let’s remember the worry and dread faced by customers and do all we can to be there for them.
