The reluctance of consumers to engage with their debts is one of the most challenging – and yet most common – barriers to overcome in debt recovery. In fact, when we explored the issue of disengagement in our paper, ‘Tackling the Engagement Gap: Addressing the reluctance of consumers to discuss debt’, we found that millions of consumers are not engaged in dealing with their debts.
It is also the most critical barrier to overcome, because if we cannot speak to those in debt, we cannot demystify the process, we cannot help individuals understand that support, forbearance and tailored solutions are available, and we cannot empower them to take control of their financial circumstances. Where consumers do not engage, their debts will remain unresolved and, for many, their financial difficulties will become entrenched.
There are various reasons that drive consumers not to engage with their creditors and in many cases, consumers are dealing with more than one issue. Debt is often just another challenge for them to contend with. It is important, then, to understand the underlying challenges and consider what needs to change so that individuals feel more comfortable engaging with their creditors.
This lack of information means that when someone finds themselves in arrears, they are frequently unaware of the types of forbearance that may be available
What we found was that in many instances, feelings of fear or shame which underpinned the reluctance to engage were often rooted in a lack of information. This makes some sense – being in debt is not something we are ever prepared for. When it strikes, it is often out of the blue and is usually accompanied by other challenges. This lack of information means that when someone finds themselves in arrears, they are frequently unaware of the types of forbearance that may be available; they have little knowledge about how to access free advice; and their lack of experience and awareness makes them more susceptible to online misinformation.
It goes without saying that investment in national financial education is crucial. Financial education is limited as it is, and very little explores what it means to be in debt or how one might manage being in debt. We called on the Government to prioritise the implementation of recommendations from the House of Commons’ Education Committee, which had been made under the previous government in a report entitled ‘Delivering effective financial education’. While there has not been any meaningful movement on financial education, the Department for Education has shared an independent interim report on the national curriculum, which notes that children, young people, and their parents “want more focus on the applied knowledge and skills that will equip them for later life and work” including financial education. We hope to see more detail on what this could look like for financial education when the independent review publishes its final report.
Improving financial education alone will not address the problem. Online misinformation floods the internet, across forums, websites and social media, and it is extremely harmful to consumers that fall victim to it.
Sometimes it can be well-meaning but incorrect advice; in many cases, it can be conspiracy theories; and in some other cases, it can be malicious actors looking to exploit those in dire circumstances. We have seen examples of individuals being charged for unregulated and incorrect advice – but because it comes with a message that those in debt want to hear (“get out of debt for free and without any consequences”) and because it catches them at a time when they are at their most vulnerable, it can succeed. The biggest problem with all of this misinformation is that it is always the individual consumer who ends up bearing the consequences, not the person dishing it out. It is so important that, if a consumer truly needs advice, they seek it from an impartial and regulated organisation.
When it comes to tackling online misinformation, we did use our engagement report to call on consumer-trusted sources to do more to help educate the public and to debunk these schemes. In a positive step, the FCA recently launched a webpage dedicated to some of the online scams and misinformation that targets members of the public. We still think the regulator could do more to encourage consumers to engage with their creditors, but this is a step in the right direction.
Our own #heretohelp campaign has been an ongoing effort to educate and demonstrate to the public that engagement with creditors is often the most effective and positive step that you can take to address financial difficulties and reach a positive outcome. The campaign has been ably supported in recent years by CSA members with related content shared across websites, social media and other consumer-facing areas.
Eradicating the stigma that comes with being in debt and creating an environment where all feel comfortable engaging with their creditors is the long-term goal, and it may take some time for us to get there. But seeing that the Government and the regulator are hearing the message reassures me that we are not shouting into the void and progress is on the horizon.
