The Bank of England announcements this week that interest rates have risen by 0.5% to 1.75%, inflation will hit more than 13% later this year and we are heading for recession in Q4 has dominated UK news. It is difficult to know whether consumers are able to digest the procession of bad news if they are financial struggling. Certainly, the headlines below don’t make great reading. At its meeting ending on 3 August 2022, the MPC voted by a majority of 8-1 to increase Bank Rate by 0.5%. One member preferred to increase Bank Rate by 0.25%. The Bank and its governor look like they will get drawn into a political debate with the current process to select a new prime minister.
I have picked up on a Sara Williams, Debt Camel, post around a campaign that has been gathering momentum around consumer cancelling their energy direct debits ahead of the next round of cost increases. Sara has written a post setting out the pros and cons before consumers do anything they may regret. I have shared this and the post is gathering traction.
My feeling is that essential service providers, Ofgem and the debt advice sector need to provide an informed view on the right approach when it is clear that rising energy costs will either mean they can’t pay their monthly energy costs in full or other payments will be sacrificed, which could then mean that regulated consumer credit firms become impacted. The FCA has already put regulated firms on alert, including debt advice providers, in their ‘Dear CEO’ portfolio letters in late June 2022.
As part of the Statutory Debt Repayment Plan (SDRP) consultation responses to HM Treasury, the importance of getting monthly direct debit estimates right is important so that consumers are not building up to payment shocks when they find they have underpaid at next review.
MAT has written a blog entitled ‘What Ofgem can, and should, do to support people with energy debts’. Adam Sharples CB, has shared a joint energy briefing (written with Citizens Advice and StepChange Debt Charity), and this outlines why Ofgem needs to provide more protections for people with energy arrears.
Many of the SDRP consultation respondents have reflected on the urgent need for a protocol for dealing with energy arrears and this would work alongside existing debt solutions like a DMP.
C&R Software integrates with elanev to provide dynamic customer scores
The partnership is intended to be a technology enabler for Debt Manager users, who will be able to screen accounts for customer vulnerability and engage with the right customers sooner and at the best time and through the best channel.
Insolvency Service newsletter – Summer 2022
The Insolvency Service is planning the next conference to be held on Friday 18 November 2022.
Over the next 5 years, The Insolvency Service is set to transition to regional centres, reducing the number of offices while maintaining high standards of customer service and delivering better value for money. Currently, the Insolvency Service operates from 22 different office locations across England, Wales and Scotland. On the very topical subject of enhancing value for money for the taxpayer while maintaining excellent customer service, The Insolvency Service announced in May 2022 it would reduce its number of offices to 11 Regional Centres.
The newsletter also links to the commissioned report on confidence in the insolvency regime. Under conclusions is states that debtors and IPs largely felt that debtors, and the wider public, could benefit from more information about the process and additional training for lenders to help signpost debtors in severe financial distress.
Debtors had very limited communication with The Insolvency Service and there was an appetite for more frequent communications and other improvements in this area. This may be relevant to my piece on SDRPs below. The number of interviews weren’t very statistically valid with 10 consumers by debt solution.
Quarterly insolvency statistics – April to June 2022
Debt solution trends and debt advice demand have been very topical as we all tried to complete our SDRP submissions. I have attached the quarterly infographic. IVA and DRO volumes have dipped in Q2 2022 from Q1 2022. I had used the IVA figures as a barometer of future DMP volumes and we are running at just over 7,000 a month (average of 7,192 IVAs per month), which is 5% higher than the same quarter last year.
NHS 111 software outage confirmed as cyber-attack
As another salutary warning, the NHS 111 software outage was confirmed as a cyber-attack. The attack targeted the system used to refer patients for care, including ambulances being dispatched, out-of-hours appointment bookings and emergency prescriptions.
NCSC recently announced a new Cyber Advisor scheme that will offer assured cyber-security consultancy services to small & medium sized firm, helping them achieve a minimum standard of security. Qualified Cyber Advisors will initially focus on helping their customers meet Cyber Essentials’ 5 technical controls – firewalls, secure settings, access controls, malware and software updates – by identifying and helping implement improvements that are right for the size and needs of their customer.
DEMSA SDRP response to HM treasury
DEMSA has submitted its response to HM Treasury (attached) and they have acknowledged receipt. My thanks to all that have contributed. Our general conclusion is that it is an opportunity missed and there appears to be general alignment with the feedback coming from the creditor trade associations (e.g. UK Finance). We have provided a substantive response as we strongly feel that this warrants one. We have also strongly recommended earlier engagement with The Insolvency Service.
We Are Debt Advisers (WADA) has issued a fairly strong statement around their views of the HM Treasury SDRP proposals. They have questioned the logic of moving forward with the SDRP at a time when The Insolvency Service is conducting a review of the wider insolvency landscape.
One element that the WADA statement does highlight is the limited insight by community debt advice providers that don’t deliver debt solutions into what actually happens once someone actually starts a DMP and the outcomes achieved with creditors. This will have been strongly positioned by the debt solution providers around debt negotiation outcomes and the real reasons why DMPs end early, with a range of outcomes that are captured under plan attrition. Outcome reporting will become more important under the FCA Consumer Duty. We also need to get clarity on the role of a ‘continuing money adviser’ (as per DAS/DPP in Scotland from November 2019) where a regulated debt adviser works alongside a payment distributor (e.g. Accountant in Bankruptcy in Scotland) for the duration of the SDRP.
Statutory Debt Repayment Plan Alpha assessment
I found this link relating to the report for the Statutory Debt Repayment Plan alpha assessment published on 30 June 2022. This generated some initial interest that some design work had been ongoing that aligned with all the hard work that the sector had been putting in through May, June and July 2022. I suspect that I may be wrong. I have extracted a couple of key headings and the report findings. Interested to find out who they have been engaging with based on the feedback I have had on the SDRP consultations. I am not sure whether I have totally missed something on this and I am hoping that the MaPS folk on the circulation can enlighten me and how this aligns with their work. The Insolvency Service has not been that prominent in any of the meetings in July and at the open forum in June 2022, it appeared that they were approach a supplier selection process.
Understand users and their needs
The panel was impressed that:
- the team demonstrated a good understanding of their users and their needs, showing empathy for citizens in very difficult circumstances
- appropriate and varied research methods have been utilised and a representative sample of users engaged with
- user needs were presented clearly; reflecting real world needs and those created by the service
- the team clearly showed how the design had been influenced by the user needs of debt agencies and creditors
- research has been undertaken with people with a range of access needs and improvements made to the service as a result
- the team recognised the gaps and challenges with their research and were committed to overcoming them
- private beta research plans were clear and appropriate for the next phase, but will need updating and refining when the scope is agreed
What the team needs to explore
Before their next assessment, the team needs to:
- ensure the service meets the needs of citizens. There are multiple interactions which are not visible to the citizen. The team needs to demonstrate what they’ve produced does help citizens better manage their debt and ensure they are empowered to make their own decisions
- ensure the service works for everyone. Focus research on citizens who are vulnerable or excluded in some way to understand whether it meets their needs. For example, do people with low English language skills or cognitive impairments understand the service and what is happening to them?
- mitigate the risks of having a two-and-a-half-year alpha/beta build phase. Users and the context can change quickly, and the team needs to ensure what they’re building doesn’t become outdated or irrelevant
Solve a whole problem for users
The panel was impressed that:
- the team has been working with Creditors to mitigate against one of their risky assumptions. This being that some Creditors tend to reject repayment plans due to lack of information, ultimately affecting the outcomes for debtors
- they are working with other organisations such as Money and Pension services (MAPS) and DWP to increase awareness of their service, and work with them to develop design iterations. They have plans of developing working groups with Creditors and Debt Advisors
- they have designed the service to reuse the information end users have given to Debt Advisors in the Breathing Space service. They have also explored the idea of connected APIs to pull in information for Debt Advisors within the service
- the team has been working closely with policy colleagues and were able to influence change in the legislation by showing user research evidence on pain points
What the team needs to explore
Before their next assessment, the team needs to:
- design the end user facing (debtors) aspect of the service in an accessible way to help the users understand their debt situation easily
- explore how to make the service more transparent for end users (debtors)
- explore where this service would live on GOV.UK, what’s the user journey from GOV.UK? How would Debt Advice organisations find this service? What information would be available for end users (people in debt) to help them become aware of this service and the support they will get?
- continue to engage and work with Creditors, Debt Advisor Organisations, and relevant government departments to raise awareness of the service, drive adoption, and to iterate the service based on user needs
Creditors, debt solution providers, systems integrators and other technology partners may want to read the rest of the list at the link below. It feels like intervention is required before too much tax payers money is spent.
DEMSA and a number on the circulation attended the Arum/Just events on 11th and 12th July hosted by Steve Coppard. They have now posted the video and some thought leadership on the link below, which is worth reviewing. Some of this is particularly relevant to the points above and Steve is well versed in government agency projects of scale implied above.
PS22/11 – Principal/AR regime
The FCA has published PS22/11, which has beefed up the supervision required by principal firms with more reporting from the appointed representatives (ARs). For some reason the DEMSA response to CP21-34 from March 2022 wasn’t referenced in Annex 1, though the FCA acknowledged receipt.
The FCA estimate there are currently around 3,400 principals with around 37,000 ARs, including introducer ARs (IARs). The FCA is undertaking targeted supervision of principal firms across the whole financial services sector, using improved data and analytical tools to focus its work. It’s also increasing scrutiny on firms applying for authorisation and as they appoint ARs. With adequate supervision by a principal firm with the necessary infrastructure, an AR network is a potential alternative for the provision of regulated debt advice by smaller firms, including micro-businesses. As reflected in the FCA narrative, this can include firms bringing innovation to the market as well as traditional community-based providers.
The use of ARs in the debt advice sector was also covered in CP21/30 (Debt Packagers), where we are still expecting an FCA policy statement. PS22/11 also reflects the introduction of the Consumer Duty.
“Firms should also be aware of the Consumer Duty (the Duty), for which final rules and guidance were published in July this year. The Duty sets a new, higher standard of care that firms should give to consumers in retail financial services markets. This goes hand-in-hand with some of the changes to the AR regime. Principals and ARs should consider how the Duty applies to them.”
- Principals notify the FCA of future AR appointments 30 days before the appointment takes effect
- Complaint data on AR 60 days after end of accounting period, which may not directly align with the agreement between the Principal and AR
- Annual reviews can be conducted by responsible individuals with a suitable degree of knowledge and authority below the governing body’s level
Principals need to make the pre-notification of AR appointments to the FCA and their expectation is that principals notify them of new AR appointments only after they have completed their due diligence process. They expect notifications of AR appointments only if and when a principal has concluded that the prospective AR is suitable to become an AR, and that the principal itself can effectively oversee the relevant AR.
There is a 4-month implementation period, taking effect on 8 December 2022.
The FCA is not taking forward the proposal to require Principals to provide, at appointment, an estimation of the proportion of a proposed AR’s non-regulated activities compared to its regulated activities in the first year following the appointment. They are introducing
revenue bands for reporting anticipated revenue of the AR from regulated and non-regulated activity during the first year of appointment.
Not surprisingly, August is looking fairly quiet. I have a catchup with Steve later this month on his Trustfolio experience in Episode 3, which is now available online at the link below.
I have accepted the invite to the MorganAsh ‘How Vulnerability and Consumer Duty overlap’ event on 25 August 2022 at 2pm.
This event looks a good one for forward planning with a number of speakers on the circulation.
Receive notifications of new content notifications: Subscribe here - unsubscribe anytime