How do we change consumer perception of debt and debt collection?

These are very strange times for those in the business of consumer debt collection. Despite significant moves forward by the industry towards a more customer centric approach, it is not uncommon for any debt resolution activity to be met by consumers with either blind panic and fear or aggressive dismissal. The industry needs to address why, if the consumer debt collection process has evolved, has consumer perception not moved forwards with it and what can be done to help improve consumer perception of debt and the debt collection process?

Evolution of Debt Collection

Debt collection has come a long way since the debtor’s prison of Dickensian times. The advent of the internet, which has given consumers the power to make informed purchase decisions, has driven a global shift toward more customer conscious commerce. This understanding that customer experience is of equal importance as product and price in the buying decision has meant all areas of the business which touch consumers have had to adapt – including credit and collections. This shift towards more customer centric collections has also been driven by increased government regulation regarding the fair treatment of customers. These days whether regulated or not, businesses are under growing pressure to protect vulnerable customers, put processes are in place to help people avoid getting into debt, and, for those that inevitably do fall into arrears, look for mutually satisfactory resolutions rather than simply collecting the debt.

Fear vs Comprehension

But despite these shifts, many people still meet that initial collection call or letter with fear and dread. However gentle the communication, phrases such as payment arrears, default, final demand, and debt collection still have the power to drive enormous anxiety and concern. For most people the reason for this consumer perception of debt and debt collection is surprisingly simple to understand – they do not want to be debt, they want to pay for goods or services they have received, and if for whatever reason they can’t, feel guilty, worried, and ashamed. These people, if treated fairly and sympathetically, when provided with the opportunity, will gladly settle their debts.

Impact of TV Shows: Call the Bailiffs

Some amount of worry and concern is to be expected – it is a natural human response to stress. However, other factors are increasing consumer worry and concern – and the impact of TV shows such as “Can’t Pay We’ll Take It Away” & “Call the Bailiffs: Time To Pay Up” should not be underestimated. These shows have had a far-reaching impact on reinforcing the image of debt collection as the domain of the burly bailiff bogeyman who can come knocking on your door at any moment. The reality that most debt collection is conducted through emails, letters and that companies just want to find a way to settle the debt that is agreeable to both parties is lost in these shows, which are edited for entertainment, about one aspect of the debt collection process. With no TV version of the rest of the debt collection process – which is not surprising as for all intents and purposes it would make for rather dull viewing – It is reasonable to say these shows have put back consumer perception of debt collection by 20 years.

Impact of write off adverts on consumer perception of debt and debt collection

Whilst on one hand consumers are told to live in mortal dread of a debt enforcement agent knocking on their door, on the other hand they are constantly bombarded by adverts suggesting they can write off the debts and only pay a fraction of what they owe with no consequences. Government initiatives to help those people who are in desperate financial difficulties are vital to help those with no way out become debt free and move forward. Equally critical is the advice and support of non-for-profit debt support charities. However, questions need be raised regarding the terminology used in adverts from commercial debt management businesses. What message are consumer receiving in terms to responsible borrowing when they are repeatedly told they can write off over 81% of their debts with no mention of the consequences? It is not unsurprising that when contacted with a collection call that a growing proportion of debtors are dismissive, rude, or aggressive with no interest in attempting to resolve their debt position.

The need of a clear message

As an industry, we need to work together to address these misconceptions. There is still little consumer understanding of the debt collection process, and it is the lack of knowledge that feeds fear and panic. Simple steps all business should be taking include:

• Clear signposting debt support / advice
• The inclusion of FAQ’s and information regarding the debt collection process on their website.
• Ensuring all communication is clear, fair and resolution focused.

At Barratt Smith Brown we also include a video explaining the debt collection process within the consumer Help and Support section of our website. The video was designed to enable all consumers, including those who struggle with literacy, to understand what is happening and why it makes sense for them to engage rather than avoid in the process.

In terms of helping to increase consumer understanding of the need for responsible borrowing the only answer is education. As much as the government can provide improved debt relief measures it is only shutting the door after the horse as bolted. It is time to review how as a nation we currently learn how to manage our personal finances and look at ways we can improve the education process to ensure everyone has strong financial management techniques, understands the consequences of accumulating debt and knows what to do if they find themselves in financial difficulty. Computing and food technology are taught in secondary school which are in many ways life skills – why hasn’t money management make it onto the curriculum?