Understanding the complexities of collections during challenging economic times

The shifting economic and financial landscape in Australia over the past year has placed significant financial pressures on everyday Australians, leading to a growing need for effective collections strategies by Financial institutions. Lenders must adapt to these changes and ensure they have the necessary tools in place to assist customers facing financial hardship – including those who would not ‘normally’ be facing such constraints.

ASIC’s increased focus on financial hardship in response to rising interest rates and cost-of-living pressures will further shape the collections landscape in the coming year, with a glimpse into their upcoming review of home lenders. Firms will need to ensure they have successful collection strategies, proactive communication, genuine consideration of customer circumstances, and the critical role of ongoing, quality customer engagement driven by the right talent.

A glimpse into ASIC’s upcoming review of home lenders

ASIC’s forthcoming review of home lenders holds significant implications. Home loans are the bedrock of the Australian financial system, and how lenders respond to the challenges posed by financial hardship impacts countless families and individuals. These consequences have a flow on impact to small business as frequently SME loans are secured against company Director’s homes

This review, scheduled for release in early to mid-2024, will provide valuable insights into the strategies and approaches employed by home lenders to address financial hardship among their customers. By examining these practices, ASIC seeks to identify best practices, potential areas for improvement, and the opportunities for collaboration between lenders and regulatory authorities.

In response to rising interest rates and the mounting cost of living, ASIC has signalled its intention to intensify its focus on financial hardship over the next 12 months. This heightened scrutiny underscores the urgency for lenders to assemble and retain collections teams with the right skills, empathy, capability and expertise.

Why talent is so important?

One of the  essential elements in navigating the complexities of collections during challenging economic times is having the right talent in place. The individuals responsible for managing collections play a pivotal role in not only achieving regulatory compliance, but also in delivering a positive customer experience. Here’s why having the right talent is of paramount importance:

  • Expertise in Regulatory Compliance: In a highly regulated environment, collections professionals must stay abreast of evolving laws and regulations. The right talent possesses the expertise to navigate this ever-changing landscape, ensuring that their organization remains compliant with ASIC’s expectations and any other relevant regulatory bodies.
  • Empathy and Communication Skills: Empathy is a crucial trait for collections agents. Financial hardship is an immensely sensitive issue, and customers already facing difficulties expect and deeply value understanding and compassion. The right talent can effectively communicate with customers and explore potential options and solutions making them feel heard, valued and respected during these challenging times.
  • Negotiation and Problem-Solving Abilities: Finding sustainable solutions often requires negotiation and creative problem-solving. Skilled collections professionals can work with customers to develop flexible repayment plans or alternative solutions which fit their unique circumstances, helping to restore financial stability.
  • Customer Retention: Effective collections strategies shouldn’t solely focus on recovering debts but also on retaining customers. The right talent can identify opportunities to retain valued customers by offering them suitable solutions, preserving long-term relationships and reducing customer churn. If a customer feels badly treated by a Financial Institution, the risk of losing them permanently is significantly increased.
  • Ongoing Engagement: As ASIC emphasizes, ongoing and clear communication with customers is essential. Collections agents with the right skillsets can maintain open lines of communication, keeping customers informed of their options, and engaged throughout the period for which assistance is required. .

The most efficient way for financial institutions to navigate this dynamic regulatory environment is by expanding their customer-facing workforce. A specialist, flexible workforce can quickly adapt to changing environments and contribute effectively from day one. This approach accelerates implementation, helps meet regulatory deadlines, addresses customer challenges, and mitigates the risk of penalties and reputational damage.

Momenta Group’s Resourcing Solutions:

Momenta Group brings over 30 years of expertise to the table, partnering with organisations of all sizes to address these critical challenges. Our ISO-certified processes ensure that we provide high-quality solutions with qualified and experienced industry experts who possess in-depth knowledge of the regulatory landscape, and  at a competitive market price

Momenta’s specialist resourcing expertise provides financial institutions the breathing space needed to identify and address any gaps in their controls and customer-facing teams. This proactive approach helps financial institutions bolster their compliance systems and controls before regulatory pressures escalate, thereby avoiding the risk of further significant penalties.

If your organisation is facing mounting regulatory, compliance, or customer-driven pressures and requires additional, experienced resourcing support, Momenta Group is here to assist. We provide the right resources – Contingent, Permanent and Fixed-Term, when and where you need them, for as long as you need them, ensuring that you stay ahead in this ever-evolving landscape. Contact us today to discover how Momenta can empower and reinforce your existing team.


Reference list:
ASIC (2019). Responsible lending | ASIC – Australian Securities and Investments Commission. [online] Asic.gov.au. Available at: https://asic.gov.au/regulatory-resources/credit/responsible-lending/.
Commission, c=au;o=Australian G.G.A.S. and I. (2023). Debt collection. [online] asic.gov.au. Available at: https://asic.gov.au/regulatory-resources/credit/debt-collection/.