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Collard, Sharon (2013). Working Together: Understanding Motivations And Barriers To Engagement In The Consumer Debt Marketplace. Arrow Global, Bristol.
Abstract
Methods
The study comprised customer segmentation analysis, carried out by Arrow Global; a review of existing evidence, mainly from the field of psychology; re-analysis of 27 qualitative interviews from four earlier studies of people in or at risk of financial difficulty; re-analysis of data from open-ended questions asked by MIND in its 2008 and 2011 "Into the Red" surveys; qualitative depth interviews with 10 people who had received debt advice from Plymouth Focus Advice Centre.
Insight from the customer segments
The customer segments show that problem debt can have complex causes that mean it is not straightforward to resolve. The root causes of problem debt are often loss of income or a low and variable income. It may also be linked to poor physical or mental health; relationship breakdown; poor money management; "playing the system"; disputes with creditors; and drug, alcohol or gambling addictions.
If they are unable to pay all their creditors, people use strategies such as paying the most demanding creditors and ignoring the others; paying credit debts with lower repayments (such as minimum credit card repayments) and not paying those with higher repayments (such as a personal loan); prioritising creditors that levy penalty charges; always paying "priority" creditors; and paying to retain valued services such as telephone or televison packages. There were instances in the study where people prioritised payments to lenders to retain acess to credit; a few people had "walked away" from their debts in the past.
Very often, people only seek professional advice at a late stage, after a significant period of trying to manage their debts, for example by borrowing to repay borrowing. Low levels of knowledge about the advice services that exist and the different services they offer mean that people in debt usually select an advice provider arbitrarily. The qualities that people value in professional advisers include a non-judgemental attitude; listening, understanding and empathising; a professional approach; and being knowledgeable and helpful.
Barriers to customer engagement
From the customer's perspective, how creditors communicate with them and creditors' approach to debt repayment shape their relations. If creditors get these things right, the chances of recovering the money owed to them increase. If they get them wrong, the customer may disengage from further dialogue.
Aggressive, unsympathetic communication from creditors and an inflexible approach to debt repayment undermine the basic human need for personal control that is a crucial aspect of customer motivation. If creditors do not listen or understand the customer's situation and turn down their repayment offers, customers feel powerless to improve their situation or achieve a satisfactory outcome. If creditors make customers feel worse about themselves or their situation, customers doubt their own ability to sort out their debt problems. Customers may lose the motivation to continue engaging with creditors if they make little or no progress, because of the time and emotional resources involved. In this context, repeated threats of legal action become counterproductive, because they increase the stress, anxiety and social isolation that customers experience (particularly customers with mental health problems) without offering any reasonable plan of action to resolve the situation.
Overcoming barriers to customer engagement
So how can creditors like Arrow Global engage more effectively withtheir customers? Customers want creditors to demonstrate empathy and understanding; to provide practical help; and to work something out together that benefits both the creditor and the customer. This approach encourages customer engagement because it helps engender trust; it makes customers feel less isolated; it gives them the opportunity to regain financial control; it makes them feel competent to sort out their debt problems; and it helps redress the power imbalance that customers may feel when they deal with creditors.
Helping customers to achieve positive outcomes that they personally value (rather than simply avoiding negative consequences) may also encourage engagement. Examples from the study included respondents who wanted to be debt-free by a certain stage in their life or to emulate a role model, or because they wanted to rebuild their credit rating.
For people with mental health problems, it is important that creditors (and advice services) have some understanding about the effect that mental health problems can have on an individual's ability to deal with their finances. People with mental health problems may also value practical help to manage their personal finances (not necessarily provided by creditors), linked to a strong desire to understand and manage the impact of their mental health problems on their spending patterns.
The study explored the potential for other organisations (such as health professionals) to act as "touch points" to provide information about dealing with debt or to refer people to debt advice services. This seems difficult to achieve on a large scale because it depends on the willingness and capacity of individuals or organisations to discuss financial matters when this is not a core part of their job; and on the receptiveness of the person in financial dfficulty to offers of help, which may be dulled by ill health or other priorities.
CORE (COnnecting REpositories)
CORE (COnnecting REpositories)
