Don’t underestimate the power of words: Government changes decades-old laws which force lenders to send intimidating letters to people with problem debt

The Government has announced important changes to default notices (the letters issued by lenders to notify people that they are behind on payments). This is the result of years of campaigning by the Money and Mental Health Policy Institute and others to make letters sent to people in problem debt more supportive and less intimidating.

This is a major victory for campaigners who have been pushing to change decades-old laws which force lenders and collections agencies to include threatening and confusing language and outdated advice in letters to people who are seriously behind on payments. Money and Mental Health’s research highlights that 100,000 people in problem debt attempt to take their own lives each year in England, and these letters are a key risk factor that can contribute to people becoming suicidal.

Just take a moment to think about that. The wording of a letter can have a devastating impact on real lives. It is not ‘just semantics’; words, language and tone matters. A lot. Even whether or not those words are presented in capital or lower case letters, red or black, determines what impact they will have on the recipient. A simple letter – the most traditional form of business communication – is not so basic after all.

At Engage Comms, we first started working in the sector back in 2013 when we were commissioned to carry out in-depth online stakeholder and consumer research into the perception of the debt collection sector by the industry body the Credit Services Association. What we found and subsequently recommended in our report, prompted a huge step-change in how debt collection agencies communicated with those in arrears online and off, which could clearly be seen when we revisited the research in 2019 (read more on this here.)

As communications experts coming to the sector with a fresh perspective, what immediately struck us was that the role of debt collection agencies from both a commercial and social point of view is to make contact and engage with people in arrears to recover whatever they are able to afford (and/or determine that they can’t or shouldn’t have to pay). It isn’t financial services, it’s communications. And compassionate communication with those in debt isn’t just driven by ethics or regulation, there’s a clear business case for it as well. If you treat people fairly and with respect, you will build mutual trust and ultimately be able to more cost effectively recover more funds that can go back into the economy for the greater good.

However, in 2013 the industry found itself in a situation where consumers actively didn’t want to engage with them and were being advised online to avoid them. This was down to deeply ingrained perceptions about the role and practices of debt collection agencies at a time when the industry was working hard to increase professionalism and put customer outcomes first. There was fear and distrust on both sides, and this was hindering two-way communication. The shutters were down. Not only was this bad for business, it was having a devastating impact on the mental health and overall wellbeing of those in financial difficulty.

There was no silver bullet or ‘quick fix’ to this, it would inevitably take years to address through a combination of genuine change in practices and public education around the importance of engaging with agencies to resolve financial difficulty, which has historically been a taboo subject.

Despite years of hard work to put customer outcomes – and not the client – at the heart of debt collection within what is now an incredibly rigorous regularly framework designed to protect the most vulnerable, outdated legislation is still holding back the most basic principle of opening dialogue with customers based on trust and compassion, which is why the new proposed changes to default notices are so important.

In our original research report back in 2013, we highlighted wording used in letters and then subsequently on online forums to describe and seek advice on how to respond to those letters, was creating this culture of mistrust and fear. We saw “confusion” and “harassment” being referred to again and again. This was exacerbating an already emotive and sensitive topic, adding to the taboo that is at the centre of so many issues for those facing financial difficulty.

Changing the wording of default notices to be more reassuring and supportive and less intimidating won’t fix this overnight, but it is a key part of a longer term bigger picture. It doesn’t mean giving those that issue these letters ‘free reign’ on their use of language in a bid to make them more ‘touchy feely’. When it comes to trust and transparency, clarity is key. Recipients must be informed where they stand, what their rights are and what will happen next – in plain English. Empowering people with the knowledge and understanding of how to resolve issues themselves and what help is available to them to do so, will enhance their wellbeing and ability to get out of financial difficulty, rather than potentially triggering a downward spiral of associated problems. This isn’t about ‘marketing trickery’ or ‘PR spin’; it’s about clear, concise communication, which is more difficult than it seems to get right. It starts with understanding the audience and speaking their language.

Communications has long since been an undervalued ‘soft’ skill in business, particularly in financial services, but this issue demonstrates how critically important it is from both a commercial and ethical perspective. Regulatory, legal, technological, and financial expertise are all business critical – but core communications, customer engagement, and people skills can save lives and – in such turbulent times as we currently face – can save businesses. It requires long term strategic thinking, years of experience, and a complex set of skills.

Don’t underestimate the power of words.

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