The Analysis News & Opinions
Credit confidence high, but bad debt remains a risk
A resurgence in economic confidence was experienced by credit professionals in the final quarter of 2016, according to the Credit Managers’ Index (CMI). Yet bad debt remains a risk, with only 13% of credit managers expecting a decline in 2017. The Chartered Institute of Credit Management (CICM) report’s headline index closed up 0.5 points to 59.8, ending a successive three-quarter fall. It is the highest result since the second quarter of 2015 and only the fifth time in the CMI’s seven-year history it has climbed above 59.0. The index measures confidence in the manufacturing sector, which rose by 6.2 points to 61.2, and in the services, which saw an increase of 3.6 points to 59.0. Philip King, chief executive of the CICM, said: “What is also good to see is the Index is back on its historical tracking of the FTSE All Share, following the brief and negative divergence in the third quarter of 2016.”
The CMI retracted by 1.4% in the third quarter, while the All Share rose 2.3%. “This compares to the CMI’s 8.1% and All Share’s 3.1% rises in the fourth quarter,” Mr King added. “This means the CMI has easily mitigated its third-quarter losses, and is now back on track with one of the UK’s most important measures of confidence.”
Fines for SMS texts
A credit broker has been fined £120,000 by the Information Commissioner’s Office (ICO) after being responsible for millions of marketing texts sent without proper consent. Between April 2015 and February 2016 there were 1,464 complaints about the spam messages from Digitonomy Ltd, which encouraged people to apply for loans. An ICO investigation revealed the firm used affiliate marketing companies to send out over five million messages offering loans. Digitonomy provided examples of the consent wording from the affiliate firms including: “You consent to us and our trusted partners contacting you by SMS, mail, e-mail, telephone and automated message.” The ICO insisted that this type of consent was not enough for sending marketing text messages and that companies must have a consumer’s specific permission. The ICO found that Digitonomy could not prove it had proper consent.
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The survey also found 32% of respondents saw bad debts increase across 2016, with only 13% expecting bad debts to drop in 2017.
In total, 20% expect debts to continue rising, but most worryingly a further 28% remain unsure about how debts will change, and are budgeting for rises.
IP advice
The insolvency profession has welcomed the closure of a government consultation on the creation of a new single financial guidance body.
Mark Sands, chair of the Personal Insolvency Committee of R3, said: “The creation of a new single advice body is welcome, and we are pleased to see that the provision of readily available debt advice remains a government priority.
Steve Eckersley, the ICO’s head of enforcement, said: “Businesses that rely on direct marketing must be able to confirm that people have given their permission to receive text messages and to comply with the law they must have the evidence to prove it. “Depending on the word of another company is simply not acceptable and is not an excuse. Digitonomy is paying a hefty price for not meeting its responsibilities.”
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“It is important that, when setting up the new body, the government does not just look at advice, but at how indebted individuals sort out their situation, including considering the stigma associated with debt and insolvency.
“A greater understanding of the ‘journey’ an indebted individual goes on through the debt landscape would help identify barriers and establish solutions that will ensure a better long-term outcome for those in financial difficulty.”
March 2017
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