- Unsecured personal debt now tops average monthly earnings
- 28% of Brits fear they may not be able to keep up repayments on personal debt
- The profile and payment decisions of people who owe money is changing
- Businesses must plan now to manage new groups of consumers entering arrears
The ‘TDX Group Consumer Debt Report 2017’ from the UK’s leading provider of data and technology-driven debt solutions for businesses, reveals that over a quarter (28%) of Brits fear they may not be able to keep up with repayments on their personal debt.
The online survey, conducted by YouGov, also found that unsecured debt now tops average monthly earnings¹, with more than one in four (28%) owing in excess of £2,000. Almost half in debt (49%) owe money to more than one organisation. In addition, one in four (25%) are concerned they could lose their job, while almost one in five (18%) are worried their pay might fall back.
With little to no savings buffer, those worried about work are planning to cope by changing job (25%) or taking on a second job (18%). This makes it harder than ever for creditors to gain a comprehensive view of their customers’ financial circumstances in order to responsibly recover money owed.
Although less than one in 10 (8%) would seek help from a company/lender they owe money to if they needed financial help, the report revealed that consumers are looking for businesses to be supportive and offer practical solutions to any financial difficulties they encounter, such as a reduction in repayment costs (cited by 41% of people surveyed), a reduction or break in interest being added to their debt (37%) or a part write-off of their debt (29%).
The cost of getting it wrong could be substantial to businesses with 46% of consumers saying they would not deal with a company again if it provided poor service at a time they were suffering financial difficulties, or if it failed to provide solutions that might help improve their situation. A third (33%) would share such bad experiences by advising friends and family to steer clear of a company that behaved in such a way.
Richard Haymes, Head of Financial Difficulties at TDX Group, said: “Our research shows that creditors need to act now to plan for a spike in problem debt. Many individuals are growing anxious about their ability to stay on top of their personal finances and some have already begun to run into trouble. We can expect to see an increasing number of ‘new’ customers entering collections and recoveries who are not used to dealing with arrears.
“We’re also seeing a change in the mix of creditors who are owed money, reflecting a growth in non-traditional credit default. Over time, this will change the payment hierarchy, and with the profile and payment decisions of those who owe money changing, the need to understand the customer is more critical than ever.
“In the coming months it will be major issues like the fall out from the General Election and Brexit, rather than micro industry challenges, that will have the most impact on collections and recoveries. The key focus will be to maintain flexibility around strategy and suppliers, while also building capacity to deal with an overall increase in delinquency and default. Companies must respond now to limit their exposure to rising bad debt levels.”
To view the TDX Group Consumer Debt Report 2017, please visit: http://www.tdxgroup.com/consumer-debt-report/consumer-debt-report/
¹ Office for National Statistics data shows average weekly earnings (before tax) in the UK now stand at around £502. Allowing for tax and national insurance, average monthly earnings are therefore likely to be below £2,000. (https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/timeseries/kab9/emp)
All figures, unless otherwise stated, are from YouGov Plc. Total sample size of 2,162 adults. Fieldwork was undertaken between 5th - 6th December 2016 and the survey was carried out online. Figures have been weighted and are representative of GB adults (aged 18+).Download PDF