.png)
During a recent venture to Birmingham to attend a lecture on business strategy, we were made aware that our connection to the university qualified us for a free subscription to the Financial Times. That, we thought, was a genuinely nice benefit, to having been a product of university life. That same benefit led us to an article in the FT the other day from 2010 where former Chancellor of the Exchequer George Osborne was talking about the Financial Services Authority (FSA).
In his story, the Chancellor was explaining that the reason for his decision to have the FSA abolished was because it had become too narrow in its focus on regulation which meant that when the 2008 recession hit, they and the banking sector were inadequately prepared for it meaning that levels of debt had spiralled out of control before being noticed. Then came the Prudential Regulation Authority and the Financial Conduct Authority.
Although we won’t be discussing the Prudential Regulation Authority here, the Financial Conduct Authority (FCA) heralded a new financial regulatory structure from 1st April 2013 onwards. According to the UK government, its role is to keep the industry stable, protect consumers and promote healthy competition. In the FCA’s own words, what they want to change is to drive improvements in the way that firms treat vulnerable customers so that those customers are not disadvantaged because of their personal circumstances.
To elaborate on that, the FCA have defined someone as vulnerable if due to their personal circumstances they are especially susceptible to harm, particularly if a firm is not acting with proper levels of care. Such circumstances might include factors such as poor health, cognitive impairment, new caring responsibilities and low resilience or capability. However, there is room for concern amongst the guidance on offer.
Whilst the point about the emphasis on customer vulnerability is made extremely clear, there is little by way of practical steps that can be taken to ensure compliance with the guidance from the FCA citing differences across the industry for not doing so. At one point in the guidance, it says that “firms should be able to spot signs of vulnerability”, but this does beg the question of how we should be setting ourselves up so we do spot them when we should?
There are some clues in the guidance. Eluding the general approach to incorporating the guidelines into company practice, processes, policy and culture, it says that customer vulnerability should be “taken into account at all stages of the product and service design process”. Therefore, implying that before interactions with the customer have taken place, there should be measures in place that better enable us to see signs of vulnerability in time for when the interaction happens.
Perhaps it might be helpful to share an example that relates to our own processes. Assuming that some signs of vulnerability are not detectable over the telephone which might be one of the main methods of contact with your customers, and even less detectable through email or through contact by letter, then it could be argued that compliance with the guidance can only be done by being proactive about our obligations to spot and support vulnerable customers.
Therefore, as a company that likes to adopt a reflexive approach to their own work, we may have spotted an opportunity to become a bit better at that ourselves. JSP Credit Management currently allows clients to instruct us on an overdue debt via an automated web form available on our website, but what it is seemingly missing currently is a possibility that allows our future clients to tell us if the case they are instructing us on involves a vulnerable customer. We will get that changed!
For the Chartered Institute of Credit Management (CICM), who have given access to its members to a self-assessment customer vulnerability framework test so they can assure themselves of their compliance with this vital area of our work, they suggest conducting an audit on your company’s current process to ensure it is line with regulatory requirements. Although this might result in areas for development being found and therefore an added pressure on resources, it should be seen as non-negotiable.
But where do the FCA and CICM get their guidance from? We are not sure. Hopefully, it is informed by professionals who understand the aspects of vulnerability that have become features of the guidance that their member firms are now expected to follow. As a company that, as we have mentioned before several times, is underpinned by psychological values, we would like to share some useful insights into what our understanding of vulnerability is.
From a resilience perspective we know that psychological theory states that resilience is influenced by a combination of risk and protective factors, and that those factors can be biological, genetic or external and environmental in nature. We therefore know that some factors have been known to protect customers against circumstances that might otherwise make them vulnerable such offering them autonomy and a relationship that they feel they can trust.
The link between financial hardship and mental health problems has been well proven for a while in our view. The Royal College of Psychiatrists have said that their research shows that one in every two people that are in debt also have a mental health problem. The guidance suggests that debt can both cause mental health problems and be caused by it and there is clearly a strong enough association between the two for it to be given due care and attention by professionals working in our industry.
And it gets even more complicated still when lifestyle choices are added into the equation. A paper published by the United Nations has argued that there are 3 modifiable lifestyle behaviours, smoking, physical inactivity and poor diet which are linked to a wide range of chronic diseases such as heart disease, stroke, diabetes, metabolic syndrome, chronic obstructive pulmonary disease and some cancers and these it is estimated that by 2030 these will account for 70% of all deaths globally.
If what the Royal College of Psychiatrists are saying is true, then alongside the paper from the UN we believe that our duty to consider customer vulnerability in our work takes on an even greater importance. To elaborate, if being in debt affects people’s mental health with symptoms such as low mood amongst others, which in turn can lead to behaviours such as self-medicating on a poor diet through comfort food, smoking or a lack of motivation to get outside and exercise perhaps the message needs to be carried a little more strongly.
So, what does the future hold? Hopefully, a reshuffling of the status quo, so that customer vulnerability becomes the priority, rather an A priority. Because if customer vulnerability is always playing a secondary role to market expansion, profit maximisation or any goals that many companies (in financial services or not) aspire to then how can anyone realistically expect a change the scale of which everybody would be proud to see. More multi-agency partnerships, better data reporting on levels of debt. We think it could all help.
We are here to do a bit to help businesses safeguard their cash flow against late payers or debtors that have not yet paid, so if you have been struggling to get an invoice paid and would appreciate the support of a team who pride themselves on operating in a way that is mindful of the above then call us on 01827 66820 or visit our website at www.jspcreditmanagement.co.uk and contact us to discuss your needs. We work on a no-win-no-fee basis for bad debt recovery and our credit control and credit risk services can be ordered via our website with the littlest of hassle.