According to research by Callcredit Information Group, 30% of consumers see defaulting on a loan payment as being the fault of the lender rather than the borrower.
The study also revealed that consumers are increasingly feeling financial pressure, with almost half (45%) saying the financial burden on their personal finances has increased and that they feel more pressure than they did the year before. In addition, more than a fifth (21%) of consumers say they have to rely more on credit for essentials and over two-fifths (41%) say that their ability to repay has not increased in line with higher credit limits they have been offered.
The research, which surveyed 2,004 UK-based consumers aged 18+, puts an emphasis on the importance of appropriate affordability checks by lenders, with over a third (36%) of consumers saying they have had a debt passed onto a collection agency at some point in their lives.
Some of the more common reasons for being contacted by a collections agency include:
- For money owed on an unsecured credit arrangement (e.g. credit card or car loan) – 33%
- For an outstanding utility bill – 33%
- For an outstanding council tax bill – 31%
- For an outstanding mobile phone bill – 28%
Adam Gillott, Head of Debt and Utilities at Callcredit Information Group, says: “Our research reveals that there is confusion about where the responsibility lies when it comes to preventing default. It’s evident that lenders must take charge when it comes to affordability assessments throughout the customer lifecycle. The importance of being able keep track of your customer’s financial situation accurately cannot be overstated – it allows lenders to initiate timely contact to query their customer’s financial status and implement appropriate repayment plans for those experiencing difficulties elsewhere, even before a payment is missed. In addition, it is important for lenders to verify that their affordability assessments are as robust as possible to ensure that they are lending responsibly.”
Interestingly, the research also found that 42% of consumers value a thorough and secure service over a fast and efficient one when it comes to credit checks. In spite of this, 61% were willing to wait only 60 seconds for background credit and security/ID checks for secured credit, such as a mortgage, with that figure being even higher for unsecured credit, for example a credit card, at 66%.
Gillott concludes, “These figures clearly indicate that consumers are a time precious group. Lenders should invest in technology that ensures they are providing thorough checks that are also fast enough to satisfy consumer expectation. It’s crucial that lenders look at each individual situation to develop relevant and sympathetic solutions to their unique circumstances.
“Accurately checking a customer’s affordability is about having relevant and reliable data on their financial position – income levels, financial commitments, levels of indebtedness, and previous credit history – throughout their customer lifecycle.”