We now own 9.8 million customer accounts and service over 1 million on behalf of third parties through our master servicing contracts.
Debt can be a very emotive topic. Unmanageable debt can often carry a social stigma and prevent people accessing more affordable mainstream financial products. Our approach is always to work with customers and find the most suitable solution for their individual circumstances.
In the UK, we have commissioned research to further enhance our knowledge and understanding of customers in unmanageable debt.
‘Debt Britain 2016: The Big Picture – The Arrow Global Guide to Consumer Debt.’ provides a comprehensive overview of the state of personal indebtedness in the UK and of the consumer debt industry. Arrow Global Group plc, a leading European purchaser and manager of debt, has commissioned this report to explore the role of debt in consumers’ lives and in the nation’s economy, providing a balanced assessment against the background of the steady flow of reports focused on consumers’ problem debts.
‘Debt is an emotive subject. Analysis of media coverage of personal debt in the first six months of 2015 revealed that 83% was negative in tone, focusing mainly on the number of households that were struggling to pay their debts or unable to do so. Studies of the problems resulting from over-indebtedness are a regular feature in the news agenda.
These reports serve a vital function, exploring and exposing the problems that over-indebtedness and default can create. They are not designed to address the broader issue of the use of debt and its contribution to the UK economy. However, without a broader discussion of the impact of debt the media focus on these reports has presented the public with an unbalanced picture. Imagine if 83% of articles on motor cars related to accidents and road deaths.
‘Debt Britain 2016: The Big Picture – The Arrow Global Guide to Consumer Debt.’ seeks to examine debt in its broader economic context. Consumer debt funds 21% of UK consumer spending with major industries such as the automotive and mobile communications businesses even more dependent on credit packages to drive sales. Most consumers use credit responsibly and meet their commitments. Without access to debt their choices would be genuinely constrained and businesses would lose a substantial proportion of sales. So debt plays a vital role in the economy that we hope this report will shine an informative light on.
For a variety of reasons a proportion of consumers will always fall behind on their repayments. The circumstances that drive such defaults are most often not of the borrower’s making. This report explores these causes and the consequences of default before examining what improvements could be made to provide a more effective system to manage customers through difficult circumstances and encourage debt rehabilitation.
We also look into the future. Using official government OBR forecasts for consumer debt, interest rates and unemployment, we have modelled the possible future path of credit defaults. The UK is in the early stages of a credit upswing and the debt industry should prepare for defaults to rise as debt levels build up. However, the greatest changes ahead are likely to come not from the operation of the credit cycle, but from technology which is fundamentally altering the way people interact with financial services with, as yet, uncertain outcomes.
In 2013, Arrow Global commissioned the Personal Finance Research Centre at the University of Bristol, along with the Royal College of Psychiatrists and Plymouth Focus Advice Centre, to undertake a piece of research around motivations and barriers to engagement in the consumer debt marketplace.
The research found that problem debt can have complex causes that mean it is not straightforward to resolve. The root causes of problem debt are well documented and could be caused by any number of issues, from loss of income or a low and variable income, poor physical or mental health to relationship breakdown or drug, alcohol or gambling addictions.
From the customers’ perspective, how creditors communicate with them and creditors’ approach to debt repayment shape their relations. If creditors get these things right, the chances of recovering the money owed to them increase. If they get them wrong, the customer may disengage from further dialogue, potentially worsening their existing debt problems.
Customers want creditors to demonstrate empathy and understanding, to provide practical help and to work something out together that benefits both the creditor and the customer. This approach encourages customer engagement because it helps engender trust and it gives them the opportunity to regain financial control.
Debt can be a very emotive topic. Unmanageable debt can often carry a social stigma and prevent people from accessing more affordable mainstream financial products. Our approach is to always work with customers and find the most suitable solution for their individual needs. Therefore, to enhance our knowledge and understanding of customers in unmanageable debt, in the UK in 2015, we commissioned our Debt Britain study. The study revealed a number of key findings across different customer groups, which we will take forward and use to help shape our service offering.