How contingent talent can help challenging times ahead for car finance collection departments

Car finance collections are an important aspect of the car finance industry in the UK. According to a report published by the UK Finance in June 2021, there were around 2.9 million car finance agreements in the UK with outstanding balances. The report also highlighted that approximately 4% of car finance customers were in arrears in 2020, which was a slight increase from 3.7% in 2019.

The Financial Conduct Authority (FCA) reported in November 2021 that 1 in 10 customers who had taken out a car finance loan during the pandemic were experiencing financial difficulty in keeping up with their repayments. Furthermore, the Money Advice Trust reported in November 2021 that the number of people seeking help with car finance arrears had increased by 39% since 2019.

All car finance collection efforts will need to adhere to strict regulations governing their conduct. For example, they must not harass or intimidate borrowers, and they must follow certain rules when contacting them.

Given this, what should collection departments focus on in coming weeks and months as tens of thousands of customers face increasingly significant economic strain – and how can the contingent workforce help manage the collection efforts?

Customer and reputational-focused outcomes are going to be crucial for avoiding reputational damage. 

Car companies face risking significant and generational damage to their brands and reputation if empathetic and skilled collection handlers are not utilised. Ensuring internal teams are equipped with experienced staff will be critical in managing these enterprise risks.

There is no dispute that reputational damage for any business can have serious negative repercussions on the company’s bottom line. This is of course applicable to those withint he automotive industry, and in truth, such a situation can be particularly damaging for businesses in this space. It’s reasonable to argue that reputational damage caused by an increase in complaints, or a wider perception of mistreating customers, is more damaging for banks than regulatory fines or wider corporate penalties. The trust and loyalty of customers, especially those who are multi-generational, cannot be corrected nor paid for, and retaining customers’ trust and faith will be key in the months to come.

Collections alone aren’t the only challenge – you need to have Consumer Duty centric approach to all your collection efforts. 

Consumer duty is a set of proposed reforms by the UK government aimed at giving consumers more power in their interactions with businesses. The proposed changes include measures to improve product safety, strengthen consumer rights, and enhance competition in markets.

1. Increased scrutiny of debt collection practices: One aspect of consumer duty is a focus on fair treatment of consumers, which could lead to increased scrutiny of debt collection practices. This may result in more stringent regulations on how debts can be collected, and stricter penalties for companies that engage in abusive or unfair practices.
2. Greater emphasis on consumer education: Another aspect of consumer duty is a focus on improving consumer education and awareness. This could lead to more resources being available to help consumers understand their financial rights and obligations, as well as greater transparency around debt collection practices.
3. Enhanced consumer protections: The proposed reforms include measures to strengthen consumer protections, such as improved dispute resolution processes and increased penalties for companies that breach consumer protection rules. This could make it easier for consumers to challenge unfair or inaccurate debt collection practices.

In essence, reforms will result in greater scrutiny of debt collection practices, enhanced consumer protections, and more resources available to help consumers navigate the complex world of finance.  One of the main focusses will be on adopting an empathetic approach to collections. An empathic approach towards customers who will be struggling to meet their financial commitments are more likely to respond to collectors who provide a positive and supportive experience, and this will be heightened during times of economic crisis.

What are the benefits of using a contingent workforce for your collection efforts? 

Utilising a contingent workforce in finance debt collection efforts can offer several benefits, including:

1. Flexibility: A contingent workforce can provide the flexibility needed to handle fluctuations in demand for debt collection services. This can be particularly useful for businesses that experience seasonal or periodic spikes in debt collections.
2. Cost savings: Engaging a contingent workforce can be more cost-effective than hiring full-time employees, as businesses only pay for the services they need, when they need them. This can help reduce overhead costs associated with maintaining a full-time workforce.
3. Expertise: A contingent workforce can provide specialized expertise in debt collection, including knowledge of industry regulations and best practices. This can help ensure that debt collections are conducted in compliance with relevant laws and regulations, reducing the risk of litigation or penalties.
4. Improved collections: A contingent workforce can bring fresh perspectives and new strategies to debt collections, which can lead to improved collection rates and faster resolution of outstanding debts.
5. Reduced risk: By engaging a contingent workforce for debt collection, businesses can transfer some of the risk associated with debt collections to the service provider. This can be particularly useful for businesses that are hesitant to take legal action against debtors, as the service provider can assume this responsibility on their behalf.

Overall, utilizing a contingent workforce in finance debt collection efforts can offer several benefits that can help businesses improve their collections processes while reducing costs and risk.

How can momenta help your business? 

Momenta specialises in providing small- or large-scale teams of people on demand and at speed for specialised business projects, and we have been doing so for financial services clients in the UK, and across the globe, for over 30-years.

We enable you to provide a cost-effective turnkey solution – or specific elements to -complement your existing capacity and skillsets.

Our associates are experienced, customer-focused professionals who understand how individuals and businesses alike have been impacted by the current economic climate and cost of living crisis.

They are appropriately skilled and experienced to ensure that compliant repayment procedures and plans are agreed with the customer, in a manner that is aligned with both your brand values and wider regulatory requirements.

Get in touch to see how we can help your business as you manage the impacts of the cost of living crisis landscape and tackle the challenge of responsible and effective customer repayment collections.

 

Works cited:

• FCA (2019). Our work on motor finance -final findings. [online] Available at: https://www.fca.org.uk/publication/multi-firm-reviews/our-work-on-motor-finance-final-findings.pdf [Accessed 3 Apr. 2023].

• FCA (2022). Consumer Duty. [online] FCA. Available at: https://www.fca.org.uk/firms/consumer-duty [Accessed 11 Jan. 2023].

• FLA (2023). Latest Motor Finance Statistics. [online] Finance & Leasing Association. Available at: https://www.fla.org.uk/research/motor-finance/ [Accessed 8 May 2023].