Working collaboratively with debt advice agencies: a strategic toolkit for creditors

A supportive approach to debt recovery provides a range of benefits for any organisation collecting debts. Creditors that work in partnership with the debt advice sector tend to achieve fairer outcomes, better customer engagement and sustainable repayments. Conversely, poor debt recovery practices can have a detrimental impact, disrupting people’s financial circumstances which can lead to disengagement and damage to the creditor’s reputation.

Working with our stakeholders, we are producing a suite of resources focusing on specific creditor sectors, taking into consideration their unique challenges in collecting debts. So far this has seen the production of two toolkits – ‘Working Collaboratively with Debt Advice Agencies’ and ‘Supportive Council Tax Recovery’.

Moving forwards, we will be engaging with other creditor sectors to capture good practices and make recommendations for improving debt collection processes.

A new resource to bring consistency to the way creditors work with debt advice agencies when collecting repayments from people in debt. ‘Working Collaboratively with Debt Advice Agencies – a strategic toolkit for creditors’ sets out broad good practice for joint working between the debt advice and all creditor sectors.

The resource suits different types of creditors, presenting best practice processes and case studies from creditors that already have effective partnerships in place with the debt advice sector. This will ensure that people who can repay their debts do so and that creditors receive money owed.

The coronavirus pandemic is impacting the lives of people right across the UK. The impacts will be felt disproportionately however depending not only on an individual’s health, but also their financial circumstances. Over the coming months and years, millions will struggle to make ends meet. The Money and Pensions Service (MaPS) is playing a critical role in helping people to deal with the crisis but supportive creditor practices can also make a huge difference to customers lives at this time.

The relaunch of our creditor best practice toolkit is more relevant than ever, and we hope the best practice examples that are included can be embedded in organisations across the UK. The external environment continues to change at a rapid pace, and it is likely this will carry on for some time. We have already made some changes to our planned work this year and are assessing our options for a range of other activities. While this is a relaunch of a strategic toolkit for creditors and it has been amended to bring it up-to-date with today’s good practice, much of the messaging remains similar to before and is a good reminder of how best practice set out in this document can help deliver vital support to your customers.

Seven areas where creditors could collaborate better with the debt advice sector were identified:

1. Debt advice interventions: Creditors should track their ability to collect arrears payments.
2. Customer affordability: Creditors should apply the Standard Financial Statement (SFS) methodology and spending guidelines when agreeing affordable repayments.
3. Debt advice referral strategies: Use this toolkit to review all customer communication channels and help customers with problem debt to easily access independent debt advice.
4. Creditor oversight of referral partners: Creditors want to have oversight of what happens to customers post debt advice referral. Use this toolkit to agree an approach with debt advice referral partners.
5. Engagement and partnerships: Creditors have day-to-day contact with debt advice agencies. We provide guidance on getting the most from the relationship.
6. Target specific customer cohorts for debt advice: We share some examples and case studies of innovative partnership working with debt advice agencies.
7. Align to the Money and Pensions Service supportive creditor standards: We have summarised the difference between ‘below standard’, ‘good practice standards’ and ‘exceeding the standards’.

Strategic guidance to help Local Authorities take a more progressive approach to Council Tax recovery. ‘Supportive Council Tax Recovery’ encourages best practice support for those with council tax debts by promoting the benefits of greater collaboration between Local Authority revenue teams and the debt advice sector.

The resource is modelled on progressive approaches to Council Tax recovery already being employed by 10 councils, which show that a collaborative approach with debt advice agencies results in collection of a higher percentage of monies owed. It includes suggested learnings from other creditor sectors with the aim of encouraging the adoption of these best practice methods across all 348 Local Authorities in England and Wales.

Eight steps local authorities can take towards better support of residents in financial difficulty, through improved collaboration with debt advice agencies were identified:

1. Debt advice interventions: Local authorities should track the benefits debt advice brings to residents as well as their ability to collect arrears payments.
2. Resident affordability: Local authorities should support financial statements from debt advice agencies based on the Standard Financial Statement (SFS) spending guidelines and align all internal affordability processes to the SFS.
3. Payment arrangements and enforcement: Build our recommendations into Council Tax revenues policies and use our pre-enforcement checklist. This will create a fair and consistent approach to use of enforcement.
4. Debt advice referral strategies: Use this toolkit to review all resident channels and help appropriate residents to easily access independent debt advice.
5. Local authority oversight of referral partners: You may wish to have oversight of what happens to residents post debt advice referral. Use this toolkit to agree an approach with debt advice referral partners.
6. Engagement and partnerships: Local authorities have day-to-day contact with debt advice agencies. We provide guidance on getting the most from the relationship.
7. Target specific resident cohorts for debt advice intervention: We share some examples and case studies of innovative partnership working with debt advice agencies.
8. Align to the supportive revenues standards: We have summarised the difference between ‘minimum standards’, ‘good practice support’ and ‘going above and beyond’.