Credit Management July and August 2020

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CMNEWS A round-up of news stories from the world of consumer and commercial credit. Written by – Sean Feast FCICM ‘New’ campaign calls for end to ‘thuggish’ letters THE Money and Mental Health Policy Institute has called for changes to what it calls ‘thuggish debt letters’ being sent to vulnerable customers during the COVID-19 crisis. Research by the charity suggests that more than 100,000 people in problem debt attempt suicide each year in England, and that intimidating letters are a key contributing factor. Martin Lewis, Founder and Chair of the Institute says that lenders are forced by a decades-old law to send thuggish letters to people with debt problems: “These letters ruin lives, and many lenders say they don’t want to send them, but the law gives them no option,” he explains. “In the next few weeks, we’ll have the perverse situation where lenders will be compelled to send threatening letters to millions of people, even if they’ve been given permission for a temporary break from debt repayments. That will cause distress and confusion at a time when people in financial hardship, and many struggling with mental health issues, least need it.” The government, he says, needs to put support systems in place and change the rules on debt letters: “It’s a simple change to get rid of a rule that benefits neither lender, borrower, nor the economy — and at this time, without exaggeration it could save lives.” The MMHPI claims that legislation demands that certain letters must include often complex and intimidating text in full when people are seriously behind on payments — and that this should be capitalised or in bold text. The text warns customers of the consequences of failing to take action, and the penalties that may follow. Peter Wallwork, Chief Executive of the Credit Services Association, says his members would also like to see change, but doubted such change would be ‘simple’: “While the majority of letters our members send are customer-oriented, and very clearly supportive, the statutory letters have to use prescribed language, phrases and words that every company has to include,” he explains. “Current legislation simply does not allow for formal notices that are flexible or dynamic enough, despite CSA members’ attempts to manage the way they are read, to provide meaningful information to a customer and to address any vulnerabilities throughout the life cycle of a debt. It is pleasing to see the new campaign targeting the regulator and the government, for change will require primary legislation. We will happily support the debt advice sector and other stakeholders in seeking a reasoned approach to making the changes that are really needed.” Sue Chapple, Interim Chief Executive of the CICM, is similarly supportive, but says that the issue is hardly new: “Whereas we welcome the interjection of Mr Lewis and his campaign, this is a long-running saga that has vexed many in our industry for some years and it is important that the government and the FCA are now not ‘bounced’ into an action with unintended consequences. “The debt collection industry, under the auspices of the CSA, has been doing vital work in this area, and we have warned previously of the need for greater flexibility in how debt purchasers and debt collectors can communicate with customers. It is ludicrous that some creditors have been having to send 'wraparound' letters telling a customer to ignore the legal letter they are obliged to send! Now more than ever, the focus has to be on outcomes. Any changes to current legislation must give creditors the opportunity to simplify the message and provide customers with clear and consistent information across every touchpoint about the help that is available to them.” Advancing the credit profession / www.cicm.com / July & August 2020 / PAGE 6
NEWS ROUNDUP Association adopts post-lockdown plan to enforce overdue debts ENFORCEMENT Agents (bailiffs) will implement a phased return to activity following the lifting of lockdown restrictions. Measures set out in a Post-lockdown Support Plan announced by the Civil Enforcement Association (CIVEA) follow consultations with the government that will allow local authorities and courts to safely enforce overdue council tax, business rates, parking and traffic penalties and magistrates’ court fines. Anyone who has missed a payment or been out of contact will receive a standard reconnection letter that seeks to understand how they have been affected by the COVID-19 crisis and respond as appropriate. When enforcement can resume following the lifting of emergency regulations, individuals will be given 30 days’ notice of a visit by an enforcement agent (unless the local authority has specific requirements). Before resuming visits, all enforcement agents will be given additional, mandatory CIVEA-approved training on how to protect themselves and those that they encounter in the community. Russell Hamblin-Boone, Chief Executive of CIVEA, says the plan allows his members to carry out their civic duties in line with public health advice: “CIVEA members fully accept that to simply restart enforcement visits once the government eases restrictions without understanding how people have been impacted by the crisis would not be acceptable. The measures included in the Post-lockdown Support Plan are a sensible and proactive response to an exceptional situation. Enforcement of public debt continues to be an important service to recover outstanding taxes and fines, which contributes to funding essential local services.” CIVEA’s pledge was given a cautious welcome by the debt advice sector, but StepChange Debt Charity once again called for greater regulation of the bailiff industry. Peter Tutton, Head of Policy, says bailiff collection practices have caused significant harm in the past: “Any return to enforcement action, phased or otherwise, must be preceded by government-led measures that protect those affected by COVID-19. This includes putting affordable repayment plans in place for council tax arrears before resorting to enforcement action and taking into account vulnerability and financial circumstances before acting. “With millions of people struggling with COVID-19 related debts, it is unfair and unsafe for the government to restart enforcement without these safeguards.” Elsewhere, the High Court Enforcement Officers Association (HCEOA) has similarly adopted a new Best Practice plan for post-lockdown enforcement activity and set out the principles, working practices and behaviours that all High Court Enforcement Officers (HCEO’s) and representatives will follow throughout the phased lifting of the lockdown period. In line with the latest government guidance, the plan details additional training requirements for all enforcement agents prior to any home visits and the need to follow appropriate social distancing guidance where possible. Andrew Wilson, Chairman of the HCEOA, says that his members recognise that some judgment debtors will be experiencing significant effects as a result of the COVID-19 situation: “The plan is designed to consider the case-by-case circumstances of judgment debtors and ensure they are treated fairly whilst allowing creditors to recover the money they are owed. “We are pleased this plan has now been adopted as Best Practice by the Association and shared with the Ministry of Justice to assure them of our commitment to operating in a flexible and sympathetic manner.” StepChange fears debt tsunami will swamp advice sector Andrew Wilson, Chairman of the HCEOA STEPCHANGE claims a personal debt tsunami of £6bn directly attributable to the COVID-19 pandemic is already being stored up among some 4.6 million households and, if left unchecked, is set to worsen. The charity warns that coronavirusrelated debt will act as a drag on economic recovery and will deluge advice services once the reality of people’s situations begins to hit home in the coming months. Debt charities are gearing up for a doubling in demand for debt advice by the end of the year. In response, the charity has set out three key recommendations to enable a less painful exit strategy from the debt backlash. It wants to see: ongoing protections and forbearance on housing/ rent, credit repayments, and council tax; the creation of a central fund of at least £5bn to enable grants for those who fall behind or were forced to borrow during the pandemic; and a reform of Universal Credit and in particular the abolition of the five-week wait. StepChange Debt Charity CEO Phil Andrew acknowledges that costs might be a barrier to the charity’s recommendations, but that the price of not intervening would be worse: “The misery, damage and economic drag that will inevitably follow the pandemic can and should be mitigated through public policy, and the approaches we suggest are the biggest game-changers,” he says. “Like other debt charities, we are gearing up for a significant increase in demand for our usual services. We are also working on a specific solution to help people whose finances have been hit by the pandemic and who need a short-term helping hand to get back on track without jeopardising their credit status. “The false calm in which we find ourselves while furlough and forbearance take the strain will not last indefinitely,” he adds. On the basis of research by YouGov, StepChange estimates that each affected adult has accumulated an additional £1,076 of arrears and £997 of debt. Since the beginning of the lockdown period, StepChange estimates 1.2 million people have fallen behind on their utility bills, 820,000 people on their council tax, and 590,000 on their rent. Meanwhile, 4.2 million people have borrowed to make ends meet, most often using a credit card (1.7m), an overdraft (1.6m) or a high cost credit product (980,000). Advancing the credit profession / www.cicm.com / July & August 2020 / PAGE 7
Page 1 and 2: CREDIT MANAGEMENT CM JULY & AUGUST
Page 3 and 4: 14 CARRY ON REGARDLESS Matthew Godb
Page 5: GET YOUR CREDIT CONTROL SALARY SURV
Page 9 and 10: THE CICM THINK TANK > THE NEWS IN B
Page 11 and 12: INSOLVENCY PRIME STAKE Insolvency P
Page 13 and 14: INSOLVENCY EXCLUSIVE The Moratorium
Page 15 and 16: ASK THE EXPERTS IN this series, we
Page 17 and 18: COMMERCIAL COLLECTIONS PERSONAL ACC
Page 19 and 20: COMMERCIAL COLLECTIONS AUTHOR - Sea
Page 21 and 22: SECTOR COMMENT DINING OUT Has the r
Page 23 and 24: OPINION AUTHOR - John Ricketts FCIC
Page 25 and 26: LEGAL MATTERS AUTHOR - Peter Walker
Page 27 and 28: VIEW FROM THE SEA FRONT AUTHOR - Da
Page 29 and 30: EDUCATION & MEMBERSHIP Which CICM q
Page 31 and 32: Handy Andes are not to be sniffed a
Page 33 and 34: COUNTRY FOCUS France is our nearest
Page 35 and 36: COUNTRY FOCUS AUTHOR - Adam Bernste
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Page 39 and 40: CAREERS ADVICE STAYING AHEAD Why op
Page 41 and 42: It needn’t be that hard. Imagine
Page 43 and 44: OPINION AUTHOR - Chris Sanders FCIC
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