Stakeholder INTERVIEW INSIGHTS

The research team also conducted interviews with credit professionals over a period of three months from July to September 2022 across a broad range of roles – management, consultants, financial counsellors, and external advisors.

The aim of the interviews was to obtain insights into the practices of organisations involved in collections and hardship processes. The research team used data from interviews to supplement the information about credit delinquency supplied by credit bureaus.

Theme 1. Post pandemic emerging trends

“During COVID, lenders widely offered deferral and hardship assistance to customers, including halting enforcement activities such as selling assets. However, in recent months, it has been difficult for these lenders to return to pre-COVID collection practices which is starting to result in higher rates of arrears.”

– Steve Johnson, Kadre Consulting. Director

“One of the biggest changes for credit managers during COVID-19 was the way they communicated. The focus is now on engagement rather than dollars collected and the look and feel of communication is much softer. We commissioned a linguistic expert to rewrite our letter suites to make sure customers felt safe.”

– Brooke Lawrence, Recoveries Corp. Group Manager Client Services.

The research team conducted structured interviews with a set of 14 questions. Respondents were asked questions about expectations and processes about overdue credit, financial hardship, professional skills, as well as technology and automation.

The report authors collated the Interview responses and analysed the text to extract key themes that emerged from the discussions.

Key themes and insights from interview participants are presented below.

“Demand for financial counselling reduced by around 30% during COVID due to increased unemployment benefits and forbearance from creditors. Now, levels are returning to pre-COVID in some agencies, but not yet at that level at the National Debt Helpline. We expect things to worsen as the economy struggles with rising interest rates and cost of living pressures.”

– Fiona Guthrie, Financial Counselling Australia. Chief Executive Officer.

The pandemic changed expectations around overdue credit and financial hardship in Australia. The pandemic saw a marked reduction in levels of overdue credit as well as a reduction in requests for hardship assistance. First, respondents viewed stimulus packages such as JobKeeper or early access to superannuation as helpful for consumers in paying down outstanding debts.

Second, participants believed that moves to offer payment arrangements during the pandemic were likely to have changed consumer awareness of hardship. The banking regulator, APRA, required financial institutions to offer payment deferral during the pandemic. A reported $7.2 billion of loans were deferred (0.5% of housing loans outstanding). While the deferral program ended in 2021, interviewees believed there was a greater education of consumers around the use temporary loan deferrals. This may lead to a higher ongoing level of hardship requests from consumers.

Third, the economic and social circumstances created by the pandemic led many credit providers to soften their stance towards consumer hardship requests. Credit professionals, and particularly those in collections/hardship strategy teams, experienced the impact of Covid- related hardship and became more empathetic towards future requests. Financial counsellors pointed out that nature of Covid showed anyone could be vulnerable and may be unable to make payments on their financial obligations.

With the more relaxed stance adopted towards hardship during the pandemic, some participants raised concerns about ‘return to normal’ in customer management. For example, some consumers may have become accustomed to the more straightforward approach to hardship approval that was instituted during the pandemic, and thus reluctant to comply with more stringent processes.

Additionally, the pandemic may have led to the misclassification of hardship requests. Consumers with more long-term repayment issues (e.g., due to loss of employment or healthrelated problems) may have been ‘lumped in’ with requests related to temporary Covid-relief measures.

The credit professionals we spoke with expect the level of overdue credit and hardship requests to increase over the next year due to increased cost-of-living pressures and the end of temporary hardship and payment deferral arrangements across providers, but only after the savings buffers built up by consumers during the COVID-19 period are reduced.

Theme 2. Hardship provision is complex

“The financial hardship faced by many individuals is deeply tied to societal issues such as the treatment of women and families. Most of the contacts in Customer Payments Support Operations are from individuals experiencing domestic violence or coercion. This is not exclusive to the telco industry and addressing these issues through education and societal change is crucial.”

– Ross Charles, Optus. Collection Manager

“Credit providers have a responsibility to consider vulnerable consumers and their social license to operate. To move towards a more preventative approach, businesses should rethink their role and consider how they can spend their resources proactively rather than reactively.”

– Vanessa Herskope, Uniting. Training and Development Consultant

“We want to provide the right support to customers whilst collecting money on behalf of our clients. We have updated our quality framework focussing on customer discovery, education, and finding the best outcome for the customer, the first time. This approach ensures we build rapport and trust with customers or their representatives and in turn reduces the need for frequent contact and stress. Our approach is to share customer outcome options they may not be aware of or understand. We liaise with industry leaders regularly to adopt best practice.”

– Hannah Cook, Recoveries Corp. Operations Manager - Hardship

“Good industry practice for dealing with customers in financial difficulty is to have proactive contact with them. This can be done by identifying triggers that indicate financial difficulty and reaching out to the customer before they reach out to you. The clients that I am currently working with aim to prevent customers from reaching the point of formal hardship by offering them appropriate debt management solutions before they move beyond early arrears.”

– Steve Johnson, Kadre.

While credit professionals often deal with overdue payments and customers at various stages of the collections process, hardship requests are unique and require specialist training, skills, and knowledge. Hardship requests often stem from extremely challenging circumstances (relationship breakdown, loss of employment, health problems), and the associated external stressors are likely to affect the decision-making capabilities of consumers.

One respondent explained that the average hardship-related call would take a credit professional around five times as long to resolve than a standard collections call. Accordingly, performance evaluation metrics based on call times are likely to be inappropriate when dealing with hardship requests. Most respondents reported a shift away from reliance on traditional volume-based metrics (e.g., dollars collected) towards customer-centric outcomes and qualitative factors, although the content of these varied across organsiations.

Customers experiencing extraordinary circumstances, such as domestic violence for example, may not be able to interact directly with creditor requests. Such cases may require assistance from third-party counsellors who can negotiate for the customer (with due respect for privacy considerations).

Credit professionals dealing with complex circumstances need to be able to respond with empathy – believing and understanding the situation faced by a borrower was viewed as paramount by financial counsellors. On the flipside, hardship-related calls may also be stressful for the credit professional. Staff may need to take a break, or even require counselling, following particularly intense conversations with consumers. Strategies for managing staff mental health to avoid frequent occurrences of burnout or high turnover rates are likely to prove beneficial in this case.

Debriefing sessions and roundtables following complex calls are likely to help drive strategies for the management of hardship cases.

Theme 3. The role of technology in customer support

“Although we have a portal for people to selfserve, take-up rates are low when it comes to hardship and telephone communication is still the preferred method. This is where arrangements are made, and data shows that people are more likely to stick to these arrangements when made via telephone call rather than self-serving.”

– Brooke Lawrence, Recoveries Corp.

“I know that many people in the debt collection industry have had great uptake of automated processes because many people prefer them.

However, from a financial counselling perspective, it can be difficult to only communicate through email. Sometimes, picking up the phone and talking to someone is necessary, but if you can’t get through or don’t get a response, it feels like hitting a brick wall. This lack of access is not only an issue but a missed opportunity, as a phone call can lead to better outcomes for both parties.”

– Fiona Guthrie, Financial Counselling Australia

“We don’t have any self-service for hardship, and we try to address it in a personalized way because when it comes to hardship, there is no one-size fits all. We provide a comprehensive hardship pack to each student who have indicated they are in hardship. We also do training around hardship and have implemented voice key word recognition triggers in our system to identify hardship behaviours that haven’t been communicated yet.”

– Ricky Forster, formerly Zeefi, General Manager Financial Services

“While some hardship requests require specialised handling, some requests are more straightforward and could be processed by consumers themselves. ‘Self-service’ provision of hardship requests, such as through an online form, may aid consumers in making near-timely payments...”

While some hardship requests require specialised handling, some requests are more straightforward and could be processed by consumers themselves. ‘Self-service’ provision of hardship requests, such as through an online form, may aid consumers in making near-timely payments (such as when there is a temporary mismatch between a consumer’s payday and a bill payment is due).

Self-service may also help consumers avoid feeling uncomfortable describing their personal circumstances and allow for a more efficient allocation of credit professional resources –although care was expressed to ensure its use only at early-stage delinquencies. In-person conversations, usually via phone, were viewed as ‘opportunities to connect’ for some participants. Self-service was viewed as particularly promising when dealing with younger consumers, who are viewed as disliking contact via SMS or email.

Secondly, technology was viewed as offering potential for earlier-stage customer intervention.

For example, some credit professionals use artificial intelligence (AI) to identify specific keywords or key phrases during customer conversations (e.g., ‘I have lost my job,’ ‘gambling.’) While such software can assist phone operators, it is still relatively nascent technology and requires support from management for implementation. Similarly, the growing role of AI in receivables management may offer decisionmakers with the necessary tools to identify customers who may need additional support and direct trained skills credit professionals to support those customers. The use of Comprehensive Credit Reporting (CCR) data provides a potential avenue for early-stage interventions – consumers predictably fall behind on credit card or personal loan payments before other products.

Theme 4. Credit professionals’ skills

“In terms of skills, collections officers need to be able to communicate, but they need to be able to communicate with the customer base that they’re dealing with. It would not be effective to place someone from Metro Perth in a hardship officer role in Broome.”

– Troy Mulder, Horizon Power, Retail Operations Manager

“Proper training and mentoring are crucial to placing the right people in the right roles. Being resilient, articulate, and respectful in communication is essential, and diminishing people is not tolerated. In our training, we have a rule that if a statement is not non-judgmental, inquiring, or respectful, it should not be said. When designing quality assurance frameworks for organizations, it’s important to focus on the intent of the conversation as well as compliance requirements.”

– Sue Fraser, Uniting Senior Manager, Enterprise Partnerships