Sam Goodacre – Head of IT, EQ Credit Services
In October 2020, the trade association for the UK banking and financial services sector, UK Finance, reported that lenders had not only moved fast, but had also provided a lot of support to borrowers. At that point they had given 2.5 million mortgage payment deferrals, offered 1.13 million payment deferrals on credit card debt, and agreed nearly 800,000 deferrals on personal loans. But happened next?
The big consumer payback
Encouragingly, analysis showed that over three-quarters of customers who chose to defer have returned to making regular payments. But to this day, this still leaves a large number of people who are struggling to make repayments.
In the UK we’ve been through a successful vaccine rollout, seen the easing of restrictions, but we remain cautiously optimistic about the future.
Such caution can be seen in consumer spending data for June 2021. Spending on debit and credit cards dipped for the first time since January. More significant is that June 2021 spending was 95% less than that of February 2020’s average level. People are being actively cautious with their spending.
So how can lenders help if borrowers aren’t currently spending? The answer is in the recent past. Many individuals still find themselves with the ongoing challenge of backdated payments; the financial aftershock of the pandemic.
In these changing times, services and technology need to be easily adaptable so that lenders can give customers the financial tools they need. Key to their success is having a clear but flexible strategy.
Make a plan and change for good
In 2019, before the pandemic hit, EQ Credit Services (EQ) chose to invest heavily in the functionality of its platform. Knowing that consumers’ digital expectations were continually growing, major aspects were developed: the flexibility of the platform, the self-service functions, and the API integration.
In early 2020 EQ were creating software that already contained the functionality needed to support payment holidays and forbearance reschedules. This meant we were quickly able to offer these solutions to clients without the need for software upgrades. Our commitment to supporting our clients continues.
As we get back to normal
As the regulator places increased focus on lenders to take action on improved customer contact and communications, financial providers need to make contact in good time before the end of a payment deferral. Borrowers need to receive timely information to enable them to understand their position.
We reduce risk in lending...Prepare for vulnerable customers.
EQ – specialist knowledge and flexible regtech
That’s why the latest EQ Credit Services software releases have included additional elements. To help our clients better support their customers, these changes include:
- Communication strategies for borrowers who are in temporary arrangements and have failed to pay on time.
- Extending the scope of our APIs to support payment cards being explicitly linked to temporary arrangements.
- Recording the customers’ consent against payment card details.
Step beyond compliance to make meaningful change
As restrictions ease, and payment holidays come to an end, we expect normality to resume. As people are getting back on their feet, responsible lenders need to do all they can to have the right processes in place. Even more so, in this age of business accountability.
Lenders will need to continue to offer flexible loan management systems for COVID-19. This is added to the Breathing Space initiative that also came into force in May 2021. Whatever the motivation, lenders need to partner with a technology provider that continues to drive products forward and deliver solutions.
With cautious optimism we prepare for the worst, but hope for the best. Without a crystal ball, we just don’t know when or if lockdown restrictions will be introduced again. We hope not, but the best thing we can do is to anticipate and plan for such a situation. That scenario brings further challenges for lenders and greater financial duress for borrowers.
Lenders can help. We have proven this, and will continue to do so. It’s a better place to be.
For more about lending responsibly, talk to the EQ Team or see the solutions we provide.
You might also be interested in...
Reduce risk. How? EQ specialist knowledge and flexbile regtech
Part of the 'Without Boundaries' regulation series.