Credit Management magazine JAN FEB 2023

OPINION
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“It is at times like these that I realise how fortunate I am to be part of the
CICM community, so that I can take advantage of the expert knowledge base
provided by the CICM, the regular educational and experience sharing forums
and of course, my network.” – Debbie Nolan FCICM(Grad))
❝
THE newspapers are full
of it. Switch on any news
broadcast and you will hear
the same thing. Things
aren’t great. This year will
be tough for many. But how
tough? And how do members of the CICM
Think Tank believe their own parts of the
credit community will be affected?
Debbie Nolan FCICM(Grad), UK
Managing Director for Arvato, says that
whilst the tsunami of debt that was
predicted after COVID didn’t happen, it’s
very likely to this year: “We are starting to
see those higher salaried, generally welloff
families who probably don’t qualify
for Government financial support, falling
into debt for the first time,” she says.
“In January last year, I wrote about how
difficult it is to plan business because in
previous times, we have always used past
performance as an indicator of future.
This theme continues into this year,
and 2023 is going to be somewhat of a
challenge for most of us in credit and
collections, whatever role we play.”
The biggest challenge, Debbie says, is
that while there has been a reduction in
fuel costs, the bills for general household
items and essential services have rocketed.
The biggest threat, however, comes from
a hike in interest rates which will be the
catalyst for ‘new’ consumers falling into
debt for the first time as their mortgage
costs spiral upwards.
Missed payments
Which? has estimated 1.9 million
households have missed payments in the
run-up to Christmas. Its survey of 2,000
people established that circa 6.7 percent
have failed to meet deadlines on either
mortgage, rent, bill or credit payments
in the past month. By combining the
study’s results with population numbers,
that figure equates to almost two million
households in the UK missing their
demands in December.
“Any savings that accumulated during
furlough have long gone,” Debbie
continues, “and even with people making
cutbacks on ‘luxury’ items such as meals
out, haircuts etc, this still leaves them
having to reduce their spend on essentials
such as food and heating. This, combined
with continuing post and rail strikes,
are hitting hard those small businesses
that survived the pandemic; so we are
likely to see increased numbers of failing
companies.”
In credit and collections specifically,
Debbie says we will need to continue to
find different ways to support those most
at risk, ensuring that we lend appropriately
in the first place and provide education
and tailored support to those that have
never experienced this kind of shock to
the system before.
“For those customers who have perhaps
fallen into debt for the first time, I am
optimistic that their experience with
firms from across the collections sector
will be, perhaps unexpectedly, very
positive,” she continues. “Nonetheless,
early engagement remains key in finding
the best solution for all parties, and firms
that have not already, will need to ensure
that the channels they have available to
communicate with a dynamically shifting
customer-base remain relevant and
accessible.”
While Debbie knows that this year will
doubtless throw out some yet unknown
and challenging obstacles, she takes
comfort from the company she keeps: “It
is at times like these that I realise how
fortunate I am to be part of the CICM
community, so that I can take advantage
of the expert knowledge base provided
by the CICM, the regular educational and
experience sharing forums and of course,
my network.”
Business pressures
Richard Peel, Manager, Business
Restructuring at BDO, agrees with
Debbie that consumers are indeed under
pressure and business failures are likely
to rise significantly: “Economic pressures
continue, with the Bank of England
increasing interest rates as it attempts to
stem inflation. In November 2022, the BoE
increased interest rates by 0.75 percent
to three percent – the eighth rise since
December 2021 and the most significant
since 1989. This is already having an
impact on mortgage rates and will further
exacerbate the cost-of-living crisis.”
During the COVID-19 pandemic,
insolvency numbers were artificially kept
lower than normal due to the support
measures and restrictions implemented
Brave | Curious | Resilient / www.cicm.com / January/February 2023 / PAGE 15
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