How do creditors make decisions on what course of action, including litigation, is appropriate for each customer who owes them money? Data and information are the key, not only commercially, but also to ensure that litigation is only used in appropriate circumstances.
The challenge has always been to source appropriate information about each customer. Creditors have made huge strides, in the last decade or so, in how they and those working for them engage with customers and seek to find suitable and sustainable solutions for repayment. However, despite these best efforts and omni-channel engagement options, there remains a cohort of customers who do not engage and where only limited information is known about the customer and their circumstances.
A number of these customers will follow a litigation path which creditors will only use as a last resort but which is clearly a legitimate course of action to recover a legitimate debt. However, with the best will in the world, and in the absence of positive engagement from the customer, it is incredibly challenging to distinguish between those customers who are "choosing" not to pay, those who quite simply are not in a position to pay, and those who may be vulnerable and/or with appropriate support and discussion can agree a sustainable repayment plan.
Creditors have no desire to continue litigation against a customer who is unable to pay and are intent on finding the right resolution to each customer’s individual position. To do that, however, information and data are critical. In the absence of engagement, how can creditors do that? Of course, data from credit reference agencies will provide a level of information and clients may have information from historic interactions.
One additional piece to the jigsaw, however, is already on the statute books but has not been brought into force. As long ago as 2007, the government legislated for something called information requests and orders in the Tribunals, Courts and Enforcement Act 2007.
In short, and subject to detailed regulations, an information request or order would permit the court to obtain information from government departments about a judgment debtor which could include details about the customer’s employment status and employer.
This information would support creditors in making the right decisions on what, if any, enforcement action would be appropriate. It adds value to creditors as any enforcement activity (and the costs involved) can be targeted against those who seem to have the ability to make some level of payment but have not engaged. At the same time, it supports judgment debtors/consumers as it will assist in avoiding enforcement activity (and the costs involved) against those who do not seemingly have the recourse to make payments.
Of course, if consumers engaged with their creditors at an earlier stage, the need for litigation would be lessened in any event. However, experience tells us that not all those who have outstanding liabilities will engage. As referenced above, there are myriad reasons for this and it is challenging for creditors to sort the can’t pays from the won’t pays and to identify the vulnerable.
Whilst not a panacea for all, I would advocate that the implementation of information orders and requests would be a significant tool for creditors in identifying the right customers to pursue enforcement against but also in supporting the identification of customers who are not able to pay and against whom enforcement action may not be the right course of action.
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Jim is Managing Director of Equivo’s Litigation Division and responsible for all litigation activity across the business. Jim works with Equivo’s clients to design and implement efficient, innovative and compliant debt recovery strategies which put conduct risk at the core of our thinking.