In Focus Collections
Selected conclusions from the Green Discussion Group
l In terms of reactions to the research, we were very surprised by some of the figures, for example the 25 years to pay a credit card with the minimum payments, and also the levels of write-off, and we had a debate about what kind of write-off we were talking about. l There was a sense in the group that there is a body of work here, of information that has not been brought together in quite this way before. So is there an opportunity to build on that to come up with an increasingly authoritative account of debt? And what would we need to further improve that? Which of the measures would need further consistency? lWe talked about what else we are seeing, which has not been covered, for example what people are actually facing. We know that there is a sharply higher forecast for cost of living and sharply lower forecast for wage increases. A lot of people are facing benefits
restrictions and other constraints on their welfare. And we observed that many of these things were out of their control. l People in difficulty have maybe five, six, or seven different debts and very often multiple debts in the same category, so we talked about the composition of problem debt in that way. lWe talked about the numbers of arrears and defaults, how we were defining these and how much of that is completely written off rather than still being in collections. IFRS9 will eventually be a standard
accounting practice for provisioning, which might help with standardisation everybody can understand. l The number of people who miss a payment each month, and who default, is quite consistent and has been for four or five years. There was a movement around 2010, beyond that is has remained quite consistent. So we considered how the actual numbers do not necessarily reflect the pressure that people are facing, and the number of people who are on the edge, and things could go bad for them if things move in the wrong direction. lWe talked about the journey that someone might take whereby they miss a payment here and there, and what that feels like in people’s lives – the sense of having much more constrained choices as you get more into difficulty. lWe considered education and were positive, but cautious, about what it can do. Education can certainly do some things, but there are some aspects that schools- based interventions will not cover. So what else is there? lWe talked about how institutions can identify the people who are starting to get into difficulty. How can you engage with people without having that difficult conversation, actually telling them that you
A lot of people are facing benefits restrictions and other constraints on their welfare. And we observed that many of these things were out of their control
think they are in difficulty? Because you are just as likely to generate a complaint as a thank you letter if you do not handle that very carefully. So we went around various ways to do that, and when. l There was a sense that the engagement piece needed to have more of an aspect of an ongoing conversation. There are opportunities, with technology, to send people prompts and reminders in different, more real-time ways. At the moment the FCA is very interested in this in terms of unauthorised overdrafts and how you can change people’s behaviour through technological intervention. CCR
To put this into context, we found, if we take the average credit-card balance, it would take 25 years and six months to repay if the consumer made only the minimum repayment
January 2017
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