Debt Resolution Forum published their annual research which examines the outcomes for consumers using fee-charging debt solutions – is it really beneficial to them and to what extent?
EMBARGO: NOT FOR PUBLICATION BEFORE 12;00, MONDAY, 18 JUNE 2012
WHAT ARE THE OUTCOMES FOR CONSUMERS WHO USE FEE CHARGING DEBT SOLUTIONS – DO THEY BENEFIT AND TO WHAT EXTENT?
· “Market” size study – analysis leading to open source network
· Quantitative “Outcomes” – 601 client telephone interviews
· Qualitative “Outcomes” – 12 client case studies
· Undertaken by independent researcher Emma Bryn-Jones of co-operative Zero-credit
DEMAND FOR DEBT SOLUTIONS
· Demand estimates vary widely: free to client sector principally measures instances of advice seeking, fee chargers, agreements to repay
· Both inform the efficacy of outcomes for consumers, so definition and consistency are critical
· Detailed and documented advice is given to two-thirds of people who contact DRF members – current fieldwork shows that consumers perceive this as “free” (CCCS 2011 yearbook – 360k contacts > 120k clients > est 30% DMPs + IVAs annually from prior 5 year trend, Bankruptcy / DRO handling unclear)
· Just under one in ten free to client face to face enquiries result in an assisted repayment plan that the consumer perceives as a “solution”
· Solutions vary in levels of professional support and length, meaning that we need to segment and compare solutions in progress against new starts
· The ratio of advice seeking to the uptake of solutions annually is critical to the availability of outcomes that are effective
· All estimates of demand are significant, so their variation is cause for concern
· We cannot understand outcomes unless we define and distinguish advice and solutions consistently
DRF’s Market Size research has benefitted greatly from cross sector collaboration. To maintain this momentum, we are launching an open-source network to facilitate the transparency of data and its interpretation.
SEEKING DEBT SOLUTIONS
· One in five DRF Clients sought help from a free to client agency first
· More than two in five had sought professional help first (i.e. including creditors, IFAs, other firms)
· One in five clients were recommended to a DRF member (the case studies confirmed this as referrals from free advice agencies as well as other professionals)
· Clients who had initially sought help from a free-to-client provider rated DRF members higher for several aspects of service than those who had no experience of the free to client sector.
It is a misconception that clients of fee-charging companies always go to the first result they see at the top of an internet search, or that they are unaware of the availability of free advice. A significant number of clients choose to seek advice from a fee-charging solution provider. We are currently researching active advice seekers to understand this choice.
INITIAL OUTCOMES FOR DEBTORS
· 80% of DRF clients report that creditor “sanctions” stop on entering a plan
· Creditor “sanctions” are more likely to continue in plans agreed by smaller debt solutions companies
· Smaller firms account for approaching 40% of supply so this outcome may prejudice against some consumers
DRF is researching the profile of smaller companies’ clients to ensure that vulnerable people are not disadvantaged.
DEBTORS’ IMPRESSIONS OF DRF MEMBER COMPANIES
· Pre-contract service ratings range from good to very good (other than in connection with “learning about other places to find help”, which was just above the mid-point)
· Post-contract levels of satisfaction are very high in almost all respects.
· Clients who had previously sought advice from a charity were more likely to score DRF members highly in such areas as “keeping them up to date with creditor actions” and with “what to expect from their solution”.
DRF clients believe they get good service from members. Clients’ experiences of service levels once a solution is put in place are especially high.
IMPACT OF DRF STANDARDS
· More recent clients more likely to be aware of fee examples, overviews of debt solutions, contact details etc.
DRF standards have improved transparency in recent years.
HOW DEBTORS FEEL
· Debtors feel more financially capable once they are in a solution with a DRF member
· The longer a client had been in a solution, the more financially capable they felt
· Those who had sought help elsewhere before entering a plan with a DRF member were more likely to report improved financial capability
DEBT SOLUTIONS PROVIDERS – SUGGESTIONS FOR IMPROVEMENT
· Just under a third of clients recall a DRF member making first contact with them. However, outbound calling by DRF members is by informed consent.
· Many debtors find names and terminology confusing, e.g. Greginson Peck for Gregory Pennington, debt consolidation for IVA etc.
· A significant minority of debtors are also confused about the progress of their plan, often because circumstances besides indebtedness are challenging
· Signposting inbound and outbound debt advice referrals should help to improve transparency and pinpoint under-performance
DRF is preparing best practice guides to ensure that debtors who approach members have easy access to information about every stage of the advice giving process. From this, we shall be able to develop better communications with clients, helping them to track their progress against their original expectations.
o launch of open source peer-to-peer network for professionals to share and interpret supply and demand data collaboratively
o case studies: active advice seekers who chose fee-charging providers
o detailed analysis of client demographics and financial circumstances
· Late autumn:
o benchmarking study of free-to-client outcomes
o exploration of creditor attitudes and working practices in relation to fee-charging debt management companies