Personal Finance during the Pandemic: what happens when lockdown 3.0 ends?
Currently, the UK is in the midst of its third national lockdown, which at the moment, has no end in sight. However, when restrictions are finally lifted, temporary government schemes such as furlough are expected to end, and those already struggling financially are set to face significantly more pressure.
Recent statistics highlight that during 2020, the amount of debt repaid was the highest since 1993, despite the pandemic causing financial distress to many through a change in employment status, income loss, or sickness.
Regardless of these uplifting statistics, we haven’t yet seen the full financial effects of the pandemic, and when we are finally able to see how the past year has truly affected both businesses and individuals, the financial landscape is more than likely to change.
So, what exactly will happen when changes begin to happen, and how can the debt industry prepare for the expected influx of those seeking debt advice and support?
What should the debt industry expect?
Traditionally, debt advice companies have used the age-old, and somewhat outdated, ‘call-centre’ method of working. One of biggest problems with this is the inability to relate to younger consumers, who resonate more closely with a different style of communication.
According to our most recent survey, a shocking 4 out of 5 people wouldn’t feel comfortable speaking to a professional debt advisor about their debt.
Harjit Moore, Freeze Debt CEO, spoke about the necessary changes needed in order for the debt industry to be adequately prepared to take on a heightened capacity as we move into a difficult few months:
“The financial effects of the pandemic have been devastating for so many people, and from what we know, a large fraction of those who have suffered are young people.
Not only has the debt industry still not taken advantage of the advanced technology available to them, but is still relying on a way of working that just doesn’t appeal to the people who need the most help.”
Along with the majority of survey respondents who admitted not wanting to share their debt worries with a professional, 15% claimed that they had nobody at all to speak to about their financial stress.
“People don’t want to speak about their debt.
It’s embarrassing and hugely personal, and going through a standardised set of impersonal questions and intimate details over the phone can be humiliating. It takes away any autonomy from the customer, and can be a hugely off putting aspect of seeking support.”
The urgency for said changes to the way the industry works is more prevalent than ever, with over 10% of debtors attributing their debt to COVID-19, meaning a potential 800,000 or more of those struggling could be doing so as a result of the pandemic alone.
“At the moment, a lot of debt advice and solution companies that are set in their ways aren’t willing to, or even considering, changing in order to meet consumer preferences and demands.
We’re living in a digital age, and the more that technology continues to advance, the further away those that aren’t adapting their services to work with said technologies will become from appealing to a wide range of consumers that require their help.”
Another concerning aspect of the industry’s current way of working is the apparent misselling of insolvency products as highlighted by recent data.
According to official reports, despite DROs and bankruptcies falling by approximately a ¼, IVAs increased by a small, but significant, 0.5%. But why?
If you’re struggling with debt as a result of the pandemic or struggling to find the right solution, visit the Freeze Debt website for more information about what we do, and how we can help you to find a debt solution based on your personal circumstances.
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