‘Collections & Vulnerability’ – A Considered Approach 

Not so long ago those two words ‘Collections’ and ‘Vulnerability’ would rarely have been seen in the same sentence and yet they are inextricably linked. Often the first inkling an organisation will have that a customer is in a vulnerable situation is that they are indebted, it stands to reason therefore that the credit team will be in a prime position to better identify and support these customers.

Yet it doesn’t stop there. Recent regulatory changes within Australia across the Energy, Water, Banking & Telecommunication sectors, calling for better identification and support of vulnerable customers, mean that debt is no longer just the domain of the credit team but is now everyone’s business.

More organisations are now looking to upskill frontline staff in early intervention strategies. Such practice can help stop debt escalating for customers and assist staff to recognise any red flags that may point to a customer experiencing vulnerability.

Credit and specialist teams are honing their skills to become better at assisting and supporting customers experiencing varying vulnerabilities that may affect their ability to repay debt.

Meanwhile, organisations within the commercial business-to-business sector would be forgiven for thinking that this issue applies solely to companies dealing with personal consumer debt. However, whilst most of the focus of vulnerability up until now has been within the mass market consumer space, it is also very relevant to individual business owners who can experience similar levels of difficulties requiring acknowledgement, assistance and support from their creditors.

So, knowing that all of us across a wide variety of industry sectors will be affected by this; let’s look at why there is a focus on vulnerability, what is vulnerability and what does it really mean for organisations within a collection’s context?


Why the focus on vulnerability?

According to the 2018 Poverty in Australia Report, over 3 million people are living below the poverty line of 50% of median income within Australia, including nearly 750,000 children*(1).

Between 2009 and 2018, power prices have increased by 75% on average, with Victoria and South Australia experiencing the greatest increases (104% and 112% respectively) *(2).

Rising house prices and high rental costs mean housing affordability further exacerbates this problem for many Australians. Add to that the findings from the July 2018 ASIC report*(3) - Australians owe $45 billion in credit card debt and more than one in six consumers is struggling to repay their credit card debt – and it’s not hard to understand this is an escalating problem leaving many Australians only a couple of pay checks away from experiencing financial difficulty. 


What is vulnerability?

Dr Brene Brown, a research professor who has spent the past two decades studying courage, vulnerability, shame and empathy, defines vulnerability as “uncertainty, risk and emotional exposure” meaning that merely “to be human is to be in vulnerability”.

However, in the context of customer vulnerability within collections, we are not talking about the vulnerability of an individual in general terms but more their vulnerability towards being further disadvantaged by a credit provider. There needs to be a definition that considers multiple factors such as a customer’s individual circumstances, the deeds and actions of the credit provider and whether either or both have put the customer at a disadvantage.

A useful definition of Customer Vulnerability comes from the Financial Conduct Authority in the UK;

“A vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”.

It is further recognised by the FCA that each and everyone of us is potentially vulnerable to detriment, but organisations need to think about individuals that may be ‘currently vulnerable’ and ‘particularly vulnerable’. People can go in and out of vulnerability or it can be more permanent. These considerations are important in supporting customers facing a variety of challenges.


Collections & Vulnerability Abroad

The UK have been focussing a lot on vulnerability in debt collection in recent years and host the first Collections & Vulnerability Summit later this year. Often trends in the UK are reflected here in Australia a short time later and understanding the journey credit providers have taken in the UK may help us prepare in Australia in the coming months/years.

‘Vulnerability – a guide for debt collection’, is the first published report following new research funded by the Finance and Leasing Association and The UK Cards Association*(4). It provides interesting data and insights as well as recommendations for organisations working with customers that owe debt. In summary, this research involved data being collected from over 1,600 staff working in in-house collections team, UK debt collection agencies and debt purchase agencies. The following was found:

  • - positive attitudes and practices were found among staff towards customers with mental health problems; of the 27 surveyed organisations, six firms participated in both the 2016 and 2010 surveys – an analysis of data from these firms indicates marked and positive

improvements were found in disclosure management, attitudes, and practices.

- organisations need to take more action to respond to customer disclosures of suicide. In the last year, 1 in 4 frontline staff spoke to at least one customer they seriously believed might kill themselves

  • - more frontline and specialist staff reported difficulties in talking about addiction – be it to gambling, alcohol, or drugs – than any other type of vulnerable situation
  • - when encountered, terminal illness is an issue that staff can find difficult between 24-33% of frontline and specialist staff report that they haven’t received sufficient training in this area
  • - identifying customers in vulnerable situations is one of the most difficult challenges that staff report
  • - supporting customers in vulnerable situations requires more than ‘breathing space’ - instead, staff require a framework for organising all the key information about a customer’s situation to identify the support needed
  • - staff also require support – in particular, qualitative data from the survey details the emotional, health, and professional impact of working with customers in vulnerable situations


The message within the guide is clear - developing effective training for better identification and support of vulnerable customers is key but this needs to go beyond ‘general awareness’. It needs to deal with the tasks that staff encounter day-in-day-out; to provide real strategies and language that can be applied to get the best outcomes for both the customer and the organisations that serve them, and for the staff in terms of emotional well-being and resilience.


Australian Regulatory Changes in response to Customer Vulnerability

Whilst it is interesting to view and learn from findings within the UK, back in Australia we are already embarking on our own journey of vulnerability within the credit industry and there are key differences, including a focus on family violence and elder and adolescent abuse as indicators of vulnerability. Several regulatory changes have occurred within this topic here in Australia over the past 2 years, across many key industry sectors. Let’s look at some of these and their impacts on the respective industries.


  • Essential Services Commission’s (ESC) Payment Difficulty Framework (PDF) - The ESC implemented the PDF earlier this year challenging Energy retailers in Victoria, and potentially Water retailers in the years to come, to rethink and improve how they assist customers facing financial difficulty.

It seeks to do away with the labelling of customers in ‘hardship’ and the premise that customers must ‘qualify’ to enter a hardship program to be able to receive any type of assistance. Instead, the PDF asserts that all customers can experience payment difficulty and as such standard and tailored assistance should be made available to avoid getting into arrears and reduce risk of being disconnected.


  • Australian Energy Regulators (AER) Customer Hardship Policy - The AER’s Customer Hardship Policy Guideline was published in March 2019 and creates binding, enforceable obligations on retailers across other Australian states to strengthen protections for customers experiencing payment difficulties due to hardship. It is less prescriptive than the PDF but moves towards more standardised hardship policies amongst retailers with an emphasis on offering flexible payment options and early identification of customers experiencing hardship.


  • ESC Family Violence Guidelines - Further regulatory changes for Energy and Water have been seen in the area of Family Violence Guidelines and the Better Practice Guide responding to family violence was issued by the ESC earlier this month. These guidelines were implemented across Water last year and the final paper for Energy was released in May for a January 2020 implementation. The guideline calls for better identification and support of customers that may be facing a family violence situation. It recognises that financial abuse often ends in the customer having accumulated a large amount of debt at the hands of the perpetrator and stresses the importance of privacy and protecting their information.


Banking & Finance

  • Banking Code & ABA Customer Vulnerability Guideline - The new banking code was released July this year on the back of the final findings of the Royal Commission in February. In chapter 14, section 38 of the code it states;

We are committed to taking extra care with vulnerable customers including those who are experiencing:

age-related impairment;

cognitive impairment;

elder abuse;

family or domestic violence;

financial abuse;

mental illness;

serious illness; or

any other personal, or financial, circumstance causing significant detriment.

With such a strong focus on better identification and support of vulnerable customers, the Australian Bankers Association is currently in consultation with stakeholders to produce a new Vulnerable Customer Guideline for the industry to be implemented in 2020.


  • Telco Consumer Protection Code - Similarly, the Communications Alliance Ltd’s, Telecommunication Consumer Protection Code has a big focus on vulnerability, stating;


‘Disadvantaged and vulnerable consumers will be assisted and protected by appropriate Supplier policies and practices.’


Commercial Sector 

Much of the focus so far in Australia and abroad has been on the consumer rather the commercial SME space and yet individuals running small businesses are just as likely find themselves in a vulnerable situation as personal consumers. Given the importance of small business to the Australian economy, we should really be doing what we can to help small businesses thrive, which includes understanding vulnerability in the context of a small business owner.

The new Banking Code goes someway to offering further support to small business and farmers with new guidelines on loan repayments, following up on defaults and taking enforcement proceedings. In a similar vein the ESC has extended the family violence guidelines and responsibility of the retailer to assisting small business owners that may be in a family violence situation. In light of this, it is only a matter of time until the commercial sector needs to focus more on vulnerability in a collections context.


Debt Collection Agencies & Debt Purchasing Companies

Debt collection agencies, as an extension of the organisations they partner with, should also familiarise themselves with recent legislation and regulation across the different sectors. ASIC’s Debt Collection Guideline protects against ‘unconscionable conduct’ with disadvantaged debtors but forward-thinking collection agencies will already have more detailed processes in place for potentially vulnerable customers such as individual case management and full access to a variety of support services. Guidelines such as the ESC’s one on family violence stipulate that a retailer still has a duty of care to past customers that have been disconnected. In many cases these accounts would be sitting with a collection agency, and as such, retailers will want to know that their collection agents also have the right training, systems and processes in place to ensure better identification and support of their vulnerable customers.


What this means for organisations?

Organisations are looking for training solutions that strike the balance between the commercial outcomes they seek and the social needs of the customer and importantly, provide resilience building and self-help strategies for staff.

In addition, for best outcomes it is critical that any training is supported by a meaningful quality framework and coaching program.

5 considerations for organisations when addressing vulnerability in a collection’s context;

1. Get Top Down Buy In – It is important that executives at the highest level recognise that debt is now everyone’s business and that support services and assistance for vulnerable customers need to extend beyond the traditional reaches of the credit and hardship teams. Consistency in approach across an organisation is critical. Departments need to work collectively together to ensure that IT systems and processes support organisational wide policy changes and that each customer facing team comes together to create delegation matrixes for effective transfer of calls to specialist teams.

2. Early Intervention Strategies – Train frontline staff for early intervention strategies. Some organisations have invested in effective collections training for frontline staff to assist with early intervention goals to avoid debt increasing for the customer and other adverse events such as energy disconnection, water restriction, default listing and legal action. At the very least, these staff will need to be upskilled to recognise triggers or red flags so that vulnerability can be identified early, and calls transferred swiftly to the team that can help them the most.

3. Know your customers – The customer is the expert in their own story, organisations need to listen to seek to understand. Customers experiencing hardship or vulnerabilities want to be heard, acknowledged and afforded the right assistance and support to help them to get back on track. By applying behavioural psychology techniques, staff in specialist teams can be trained to use the right language, ask the right questions, know when and how to apply empathy and purpose statements and learn how to keep a call grounded whilst ensuring the customer gets the help they need.

4. Know the triggers – Upskill all customer facing staff in recognising red flags. Rarely do customers disclose straight away that they are in hardship or a vulnerable situation. Staff need to recognise the triggers and follow up on this whether it be through a swift transfer through to a specialised team or following up with more questions to ensure a customer’s safety and ascertain the right assistance.

5. Invest in your leaders – Emotional intelligence in leadership is so important. Consider that in many organisations up to 60% of Team Leaders have only been in the job less than 12 months and yet manage up to 80% of your staff. The benefits of investing in training for your leaders are clear, resulting in increased motivation, higher retention rates and increased customer service.


Benefits of organisations improving their approach towards vulnerability

A common question when looking at the implementation of hardship and vulnerability programs and strategies is, ‘but what about the people that play the system?’. Will there be people that claim hardship/vulnerability simply to get away with not paying their bills? The simple answer is ‘absolutely there will’. Will this significantly affect your bottom line? Probably not.

If we look again at the UK study discussed earlier, it was estimated that no more than 7% of people receiving assistance due to suspected hardship/vulnerability were disingenuous. Similar observations within Australian organisations that have implemented hardship programs generally suggest between 5%-10% may not be genuine. Is 5-10% enough reason to neglect the many customers that are really experiencing a tough time?

No doubt there is an ethical question at play here in terms of doing the right thing for your customer but importantly that doesn’t have to come at the expense of your commercial outcomes. Results always need to be the measure of any successful training program. Organisations that have invested in comprehensive training around collections and vulnerability often report the following;

 - Improved collections results, reduced debt

-Reduced AHT

-Improved customer experience

-Reduced complaints and escalations

-Increased first call resolution

-Improved kept promise rates 

- Increase in sustainable payment arrangements 

-Better identification of vulnerable customers: ensuring the right support gets to the right people 

- More customers successfully graduating through hardship programs 

- Reduced attrition rates; more competent and engaged staff

According to UK research conducted in May 2018, businesses are losing £10.8 billion a year through poor customer service *(5). Hands down, bad customer service costs more than good customer service. Have you considered your approach to Collections & Vulnerability training within your organisation yet? More importantly, can you afford not to?


Nikki Dennis MICM is a Consultant with
eMatrix Training ‘Collections & Vulnerability
Training Specialists’.
She can be contacted on 0437 652 562 or
nikki@ematrixtraining.com.au. You can follow

her on www.linkedin.com/in/nikki-dennis.


*(1) 2018 Poverty in Australia Report, released by the Australian Council of Social Service in partnership with the University of NSW.

*(2) – St Vincent de Paul Report, October 2018  (The NEM - No “guarantee” for consumers Observations from the Vinnies’ Tariff-Tracking Project) https://www.vinnies.org.au/icms_docs/298264_2018_NEM_-_No_guarantee_for_consumers.pdf

*(3) - ASIC released Report 580 Credit card lending in Australia (REP 580), July 2018

*(4) - ‘Vulnerability – a guide for debt collection’, written by Chris Fitch(1),(2), Jamie Evans(1), and Colin Trend(3).
 (1)Personal Finance Research Centre, University of Bristol; (2)Money AdviceTrust; (3)Plymouth Focus Advice Centre. This research study was funded by the Finance & Leasing Association and The UK Cards Association.

*(5) - https://www.newvoicemedia.com/resources/serial-switchers-swayed-by-sentiment-how-bad-emotive-customer-experiences-are-costing-brands-billions


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