Year upon year, credit providers are forced to write-off millions of Pounds of customer debt, and the past two years have been no different. The Covid-19 pandemic brought about immense financial pressure in the UK which has only accelerated consumer debt, leaving credit providers in a difficult situation, as many of their customers were unable to continue paying their monthly debt repayments.
This situation has left a lot of people in the industry questioning: How can credit providers increase their collections? Read on to find out how!
How do credit providers collect debt?
The most simple answer to this question would be to hire a debt collections team to handle your debt collections, or to simply increase the size of your debt collections team if you already have one. But what if this doesn’t work? If a customer doesn’t have money to pay their monthly debt repayments – how are you going to get your money?
Generally, when a person doesn’t pay their debt, a credit provider will consider this debt ‘uncollectible’, and will pass it over to a debt collection agency or bailiff, if they cannot collect the debt themselves.
At this point, the debt is considered to be written off in the credit provider’s books. Technically, this doesn’t mean that the debt is written off, but rather, that the debt has been sold to a debt collection agency at a fraction of its value. The debt collection agency will then try to recover as much money as possible so they can make a profit. When a credit provider sells off their ‘uncollectible’ debt, they tend to lose a lot of money as the debt is sold for pennies on the Pound.
How can they increase their debt collections?
Since credit providers rely on the financial well-being of their customers, it would make sense for them to want to provide some degree of financial education to their customers or at least some guidance on where to turn for debt help. Currently, there are not many credit providers that provide their customers with financial education. So, when a customer lands up in financial difficulty, they are often unsure of the help available to them and where to turn for this help. As a result, they land up neglecting their debt repayments.
How can IVAs increase their collections?
Most people who are struggling to make their monthly debt repayments are not aware that there are debt solutions available to help them manage their debt. Debt solutions like Individual Voluntary Arrangements (IVAs) offer incredible benefits for people who are struggling with bad debt.
When a person enters into an IVA, they enter into a legally binding agreement with their creditors whereby they agree to an affordable monthly repayment that is distributed between all of their creditors for a period of five or six years. As a result, each credit provider is able to recover a much larger portion of the debt owed to them, as opposed to simply selling the debt to a debt collector for a much lower once-off amount. As the IVA is supervised by a licensed Insolvency Practitioner, the credit provider does not need to spend unnecessary costs in chasing and collecting the debt.
By educating their clients about bad debt, the various debt solutions available and by providing them with tools to help better manage their finances, credit providers can increase their collections, reduce their debt write-offs and add to their bottom line
Partnering with Debt Movement
By partnering with a trusted and reputable debt solutions firm like Debt Movement, credit providers can give their clients who are struggling financially, the opportunity to find financial freedom, whilst potentially reducing their debt write-offs at the same time.
If you would like to partner with Debt Movement, please send us an email: marketing@debtmovement.co.uk.
