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The Analysis News & Opinions

‘Nudge techniques’ for better results

Collections and enforcement professionals have begun to take an increasingly sophisticated approach which incorporates ‘nudge techniques’ and a desire to get the customer back in control of their finances. Speaking at a recent round-table debate,

run by CCR in association with Equita High Court Enforcement, Laura Haynes, behavioural insight and intelligence director

“So there are some nudge techniques that

you can use to influence the components of a customer’s cost-benefit analysis of whether they should pay. “If someone feels that there is a low

probability that anything will happen if they do not pay, the consequences of non payment are quite low, whereas if they pay, it is something of a loss. “With each of those stages, you can use

than with us, and we just have to find a way to engage

for Capita, said: “We are very interested in doing profiling based on the data that we collect during our collections process and that gets you so far, but we are also looking at how we tailor the message as a result.

Whether the customer is going to settle the debt quickly or slowly is probably more to do with them and their circumstances


nudge techniques to make the consequences seem much higher or more likely that potentially something will happen. “We have to take a sophisticated view and

appreciate that there is a difference between a nudge to get the customer to engage and one to generate the highest payment quickest.” Meanwhile, Mike Harfield, co-managing

director of The Sigma Financial Group, added: “Our lettering strategies now do not target immediate liquidation at all, they target ‘getting debt into a controlled state’. “So whether the customer is going to

settle the debt quickly or slowly is probably more to do with them and their circumstances rather than with us, and we just have to find a way to engage.”


Sharp drop in personal insolvency numbers

Last month, the Insolvency Service published its quarterly insolvency statistics for April to June 2015. They found that the return of rising wages (in real terms) has contributed to a sharp drop in personal insolvency numbers in the past year. Individual voluntary arrangements, which are often a good indicator of people struggling with the cost of living, have fallen dramatically: a year ago they were at a record high; today they are back at levels last seen in 2006. It has taken a long time but, with wages

outstripping inflation again, people are finding it easier to repay their debts without resorting to insolvency procedures. It might also be the case that the wave of insolvencies caused by the pre-recession credit boom has come to an end. Although insolvencies fell steadily after the

recession, the rate of decline markedly slowed in 2013-2014. Since then, the rate of decline has accelerated rapidly. With steady economic growth and unemployment on a downward path, bankruptcies, which are affected by factors such as redundancy or company failures, remain at rock bottom. Remember though that the official

insolvency numbers offer an incomplete look at insolvency in England and Wales: they do not include the tens of thousands of people in informal debt-management plans. Such plans are now under the oversight of the Financial Conduct Authority (FCA), and it is very important that the FCA starts to keep track of debt-management plan numbers. Insolvency numbers may go up later in

the year. Debt-relief orders become easier to enter from October, while an expected rise in interest rates could put pressure on household finances. Also from October, it will be harder for creditors to make a debtor bankrupt: this could mean more creditor petitions for bankruptcies in the next quarter as creditors hurry to beat the rule change.

Phillip Sykes President, R3

October 2015


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