Public sector debt and vulnerability

Given the impact of the Covid crisis on people’s finances, Rhona Parry, CEO at Indesser, looks at how to support different sections of society with their public sector debts

There’s an excellent TED Talk by Brené Brown called ‘the power of vulnerability’. Brené helps people accept that we’re all vulnerable sometimes. Many will face vulnerability in their lifetime, and for those people who have had their job, health or loved ones taken away by the pandemic, that time is now.

Even before the crisis, the FCA found 24 million of us had one of several characteristics of vulnerability in some form. That number will have risen as many more of us, maybe for the first time in decades, worry about whether we can pay the bills or remain employed. For many, this will be a temporary blip, but for others, they may need forbearance and support for a while to come.

For those of us working in the public sector who have a duty to collect the revenue that funds public services, this rise in vulnerability is a real challenge. We need to understand the changes in people’s lives to protect them, treat them fairly and make sure debt does not overwhelm them. How can you recover money from people at a time when more are struggling and vulnerable? How can you avoid kicking the can down the road where debt forgiveness is not an option?

Debt collection must not, and need not, exacerbate the growing pressure on people’s mental health or financial vulnerability. Identifying and helping the most vulnerable individuals in debt and finding ways to recover money fairly, efficiently and ethically needs to remain a priority for everyone from the largest central government departments to the smallest local authorities.

Problem debt
Over the past six months we have seen that people are still choosing to engage and have conversations around their problem debt. Inevitably, disclosures of vulnerability have increased, which actually helps reach the right outcome for both individual and organisation.

Based on our experience so far in 2020, here are our three top tips for all public sector bodies when dealing with vulnerable people:

Use data to know who you’re dealing with
First impressions matter. Think broadly about your definition of vulnerability and use a wide range of data and analytics to build a picture of the people you are dealing with before you contact them for the first time. There are many different definitions of vulnerability and an even greater range of variable data that can impact a person’s situation. Using this effectively is key to ensuring the right outcome for each person.

Communicate simply
Whether you are sending letters, text messages or making phone calls, give people a simple message that engages them. Conversations need to take a natural, empathetic tone, and expert questioning skills can confidently steer the conversation to truly understand the impact of Covid-19 on someone’s financial health.

Over the past six months we have seen a noticeable uptick of people sharing their financial vulnerability. Talking about challenging circumstances is becoming less taboo. Honest, simple and supportive communication, informed by data, not only protects the more financially vulnerable, it is also more effective at collecting debt. So, there is no trade-off for creditors - a finding confirmed by the National Audit Office.

Personalise and adapt to the individual’s circumstances
The last thing anyone wants is to exacerbate the worries for someone already feeling vulnerable, and debt can have severe impact on people’s mental health. It’s critical to deploy a range of solutions and use the right one with the right people. That might include using highly-specialist call agents with years of experience working in the debt advice sector, simplifying the language used to accommodate lower literacy levels, or it might include a digital form of engagement and repayment planning.

A window of goodwill
Despite the financial hardship many people find themselves in, the latest research shows large proportions of society are increasingly supportive of the public sector collecting money owed to help pay for the increased levels of government spending. Our research  shows that two thirds of people support debt collection when it is affordable. This suggests there is a window of goodwill as people recognise the need to re-build local economies, support critical public services, and help the UK get back on its feet.

The scale and cost of public services throughout the Covid-19 pandemic has been extraordinary, but we all know that public finances are strained. Particularly in local government, differences in demographic and economic structures make different parts of the country more vulnerable to the effects of the crisis. Effective and efficient debt recovery is therefore more vital now than ever before. By recognising and understanding financial vulnerability, we can help people through it.