It’s not all in the numbers: understanding debt means understanding the circumstances of debt

Most councils and companies understand the issues surrounding debt in their respective boroughs or trading radius. It informs the ways in which they deploy resources and decide when and how to collect debt. However, how many really understand the individual circumstances in each case?

With more data available than ever before, we can dig deeper into these trends on a micro level and get to the heart of the issue. Once armed with this knowledge, we can use more joined-up thinking to make it easier for more people to escape debt cycles and avoid falling into difficult financial situations in the first place.
 

Understanding circumstances

Plenty of information about the type and scale of debt across the UK is available from secondary sources like the Office for National Statistics (ONS) and debt associations like The Money Charity. That said, what’s important is how we use this information to understand the people we’re dealing with – and their ability to cope.

Correlating the numbers with macro-economic trends like disposable income (in real terms) is part of the picture and can help us pinpoint what exactly makes a repayment plan affordable. We also need more granular data, such as individual employment status, when they get paid and how late their bills have been in recent months, to really make a difference.
 

Making systems work for debtors

While some figures may be available from credit agencies, it’s also important to source your own primary data. Whether through surveys or corresponding directly with your debtors, finding the answers to important questions can help start a productive dialogue and build systems that work for everyone.

This means, for example, researching potential customers’ abilities to pay for the goods or services rather than offering instant credit and encouraging debt. Afterwards, elements like new payment methods and ways of staying in touch can help remove the pain from settlement of any outstanding sums.
 

Debt prevention

Understanding the circumstances surrounding debt also empowers us to act to prevent debt spirals. After all, it’s in everyone’s interests that debts are repaid.

With this in mind, Chambers of Commerce could encourage companies to play a bigger part in their local area. Incentives for businesses to join in and contribute would help revitalise struggling areas with extra trade.

Councils and businesses alike could also promote local community-building projects, encouraging unemployed people to join in without financial penalty. These kind of activities not only improve the economic environment, but also build the links we need to engage directly with debtors. This can help us kick-start a constructive and meaningful dialogue and gain a greater understanding of their circumstances. It also makes it much easier to know when enforcement action is truly necessary. That way, there is less concern or stigma surrounding the essential reclaiming of unpaid debt.