What to do when payment holidays come to an end?Topic: Finance & DCAs
In the UK, 1.8 million homeowners joined the mortgage payment holiday scheme amid the coronavirus crisis in March. The scheme which UK Finance estimates amounts to an average of £755 per month, was originally introduced until the end of June, in a bid to help households whose financial situation had been impacted by the pandemic. More recently however the government confirmed plans to extend the payment holiday deadline by an additional 3 months, to 31st October 2020.
Moreover, measures introduced by the Financial Conduct Authority (FCA) including interest-free overdrafts up to £500, and temporary payment freezes on both credit cards and loans, are also set to be extended until October 31st.
Though these extensions have only recently been confirmed, eventually these measures will need to come to an end. And as some consumers may be feeling financially anxious in a continually uncertain post-COVID19 landscape, organisations and firms need to start planning now, how they are going to handle payment holidays coming to an end.
Communicate next steps to customers
Even prior to the coronavirus crisis, 9 out of 10 consumers reported that they suffer from stress and anxiety as a direct result of their debt issues. As the pandemic has caused a lot of uncertainty, consumers are likely to be even more vulnerable. So when companies are planning to communicate next steps to consumers coming to the end of a payment holiday(s), to be effective they will need to ensure they understand their customers’ circumstances and provide consumers with as much notice as possible. By starting these conversations earlier on, your company can tailor messages appropriately and give consumers the best opportunity to prepare financially.
Introduce flexible payment arrangements
Payment holidays were introduced to support individuals experiencing temporary financial difficulty as a result of coronavirus. Given that OECD GDP projections for 2020, predict that the UK will be one of the countries worst impacted, introducing a level of flexibility for when payment holidays come to an end could prove worthwhile. By introducing a collection process which allows customers to make payments whenever and wherever they like, arrange various repayment plans, make a promise to pay or speak to an agent, your business can empower customers to self-cure their debt.
Utilise a multichannel approach
When payment holidays come to an end you need to ensure that your business continues to communicate with customers and for this to be effective, it’s worth evaluating the communication channels you are utilising. Research reveals that just 45% of UK households have a landline, compared to 84% having a mobile phone. While communication channel preferences will depend on various factors within your customer base, given the aforementioned stats and relatively slow pace and high cost of direct mail, optimising for mobile could be a great place to start.
Signpost suitable debt advice
In a continuingly uncertain landscape, individuals are likely to be feeling more vulnerable than usual. Though the regulator has still not confirmed whether additional resources, for example debt counselling, will be available to consumers over the coming months, the FCA have said – “Firms should consider signposting customers towards sources of debt advice… debt advice may be helpful for customers coming to the end of payment holidays”. Thus it is important that this has been factored into your communication strategy.
Though unrelated to the coronavirus crisis, the FCA recently fined Lloyds bank £62 million, for their mis-treatment of mortgage customers in financial difficulty, stating they had failed to help customers who were vulnerable. This serves as another reminder of how important it is to communicate with customers and ensure you understand their circumstances.