Helping customers in need can be hard work but rewarding!

Why help customers in need?

Financially vulnerable customers may find it difficult to meet their payment obligations to the organisations that provide them with products and services. Where the customer has actively sought out that supplier, it’s because they value that product or service. In these situations, the customer is more likely to be engaged making it easier for the company to provide assistance.

But what if the customer has not actively sought to buy from you or possibly does not value your service?

This is often the case with the services provided by utility companies, local authorities and other Government departments. Often in these situations, the customer is only a customer because of where they live. And whilst in some retail utilities such as energy the customer has choice, in practice many customers will simply continue with the incumbent energy supplier when they move in - either as an active decision or as a passive one by virtue of the fact that they simply consume energy without advising the supplier they’ve moved in.

Whilst some of these customers will recognise their obligation to pay and will be actively engaged, others, the ‘disengaged, can’t pays’ can be difficult to identify and help. In many consumer sectors, credit risk can be mitigated and customer engagement encouraged by withdrawing products and services. But in some utilities and public services this is simply not an option. So, bad debts simply keep rising.

All these organisations can realistically do is either:

1. accept the rising bad debt, passing the cost on to other customers, or

2. make their bills more affordable and as a result lower the level of bad debt by simply not billing it in the first place. And not adding to the debt burden of these financially vulnerable customers.

Getting financially vulnerable customers to pay is not about applying late payment charges or legal action - it makes no sense to demand more money from those simply cannot afford it. To many, such measures are morally indefensible and most organisations would not advocate pursuing such measures but end up doing so because of a failure in process or because they are unaware of the debtors inability to pay. As companies start to face up to their social responsibilities, it’s becoming more important to identify and take vulnerable customers out of the routine collection and recovery processes and start to do something different.

But it can be hard to identify and engage with these customers

Often, there are schemes available to reduce the cost of bills if the customer requests support or has an assessment of need. But, in our experience, it is often these customers most in need who won’t ask for help. These customers are destined to become bad debtors. And many will remain in debt for many years which is bad for the organisation but even worse for them. Helping these customers to overcome this spiral of debt is more likely to result in better engagement and meaningful payments being made for the services they receive - net result, less debt written off. So how can companies start to change the dynamic?

10 things companies can do to help financially vulnerable customers

1. Take responsibility to identify them - Be proactive and actively seek to identify vulnerability and ensure records are updated.
2. Gather data - GDPR allows for companies to make relevant data from internal systems available to those in the organisation with a legitimate business interest. Data gaps can often be filled from external sources.
3. Get others to engage on your behalf - Some companies are using relationships with social landlords, debt charities and CAB for example, to ‘sell’ the organisation’s affordability schemes.
4. Proactively help customers - If you can, discount bills for the financially vulnerable based on an assessment of the data to hand. Doing this before the customer asks for help may be better all round.
5. Treat financially vulnerable customers fairly and humanely - Threatening litigation or doorstep collections simply adds cost and increases disengagement. Rather than a routine collection strategy try a tailored engagement strategy using the principles we outlined in our earlier blog: Nudging consumer debtors towards better payment behaviours.
6. Offer a wide range of automated payment options - Direct Debit and Continuous Authority take away the need for the customer to remember. Lower instalments through more frequent collections and close management of defaults can help to mitigate the risk of the debtor incurring bank charges for failed direct debits.
7. Provide maximum flexibility on instalment dates and instalment cycles - including weekly, fortnightly and four-weekly instalment periods to better align with pay-day.
8. Flexibility on missed instalments - allowing customers the choice of tagging the missed payment onto the end of the credit period or spreading the missed payment over the remaining term
9. Allow customers to take payment holidays - As with missed instalments, any planned payment holidays can be anticipated and dealt with accordingly.
10. Be pragmatic about low value plans - Where there’s a gap between the amount the debtor can afford to pay and the amount they’re expected to pay, it may be best to lower your expectation (and bill the customer less). It’s likely there’ll be no loss to the business as the revenue gap would ultimately have been written off at some point.

We’ve helped a number of organisations to better manage financially vulnerable customers in these ways. The result is a much fairer collection process, happier customers and significantly lower levels of bad debt.

If you’d like to know more contact Niall Cooter or Stephen Tebbett.

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