The cost-of-living crisis is eroding consumers' disposable income. Prices are soaring, and geopolitical factors are impacting supply chains. Wages continue to be outstripped by inflation and tax increases.  According to, "Homeowner mortgages in arrears of 2.5 per cent or more of the outstanding balance came to 75,170 in the fourth quarter of 2022, up one per cent on the same period last year".  As rates and bills continue to rise, the situation will likely get much worse before it gets better.

The squeeze on consumers

So, what does this mean for homeowners? Whilst many are coping and cutting back where they can if predictions are to be believed, we're heading for a tsunami of mortgage arrears as households are pushed to the brink.  

The early warning signs are there. Reports of buy now pay later service use are increasing across all age groups. Borrowers are curtailed, slowing markets waiting for interest rates to fall.  Savings pots are eaten into to manage monthly bills. These all suggest a wave of arrears is coming as more consumers feel the squeeze.

The operational challenge

But it's not just consumers who are vulnerable. Servicing operations are too. Servicers must ensure they have the right colleagues, processes, and platforms to handle the increased demand, maintain their cash flow, and successfully deliver the proper customer outcomes to meet their regulatory obligations.  

It's unknown when the rise in arrears will bite or how widespread the issue will be. Lenders and intermediaries need to be on the front foot. They have a huge role to play in helping customers navigate these trying times. 

A tailored response for optimum results

A range of solutions will be needed to create customer experiences with the smarts to perform and the heart to care:  

  • Identifying and working with distressed customers early on is critical. Empathetic interactions will be crucial before debt becomes more problematic.
  • Utilising forbearance tools. Ensuring borrowers know there are multiple ways lenders can help.
  • Utilise open banking to assess affordability and behaviour patterns. Identifying risk profiles and predicting those susceptible to predelinquency will help with remediation strategies. Providing a real-time view of a customer's ability to pay. 
  • Increasing options to self-serve and giving the customer control to manage their finances. Self-service is also proven to improve collection revenues.
  • Using a Multi-channel approach. It's critical lenders get a good viewpoint of their customers' needs and a solid understanding of how those needs differ across multiple user segments. With customers spread across multiple generations, all with varying digital capabilities. A multi-channel approach will ensure lenders provide services accessible to ALL their customers.  
  • Empathetic, tailored solutions based on individual circumstances. 
  • Skilled and qualified colleagues to support the vulnerable when they need it most. 

There will never be a one-size-fits-all solution; operations must apply a multi-faceted approach, with excellent customer outcomes being the order of the day. 

Will your operation be able to cope with rising demand? 

Ask yourself; do you have the right resources, systems, and capacity plans to manage the increased workload and default risks? 

Did you know that training an Arrears colleague to a fully competent level can take 6-12 months? When I think of our own colleague journey, it involves eight weeks of classroom and academy training, followed by training in the department. There will also be a knock-on effect in other departments like transactions, recoveries, complaints, and compliance monitoring. The cost of living crisis has been attributed o a rise in fraud cases, for example.

Managing the peaks

If you're not properly resourced, a sudden spike in demand could mean customer detriment and missed SLAs, often leading to significant financial and reputational risks. You could also end up with the added headache of a non-performing loan book. Remediating these can be resource-heavy and time-consuming.  

Sharing the load

Outsourcing to a strategic partner could be a scalable resource to help distressed collection operations cope, especially with the added pressure of Consumer Duty looming. 

With the correct regulatory frameworks, collection strategies and resources, all underpinned by clear leadership, you can scale up and down to meet demand, manage risk and maintain your collection revenue. But most importantly, deliver great colleague and customer outcomes simultaneously. 


young couple staring at laptop surrounded by paperwork

The art of collection

Recovering a loan can be an onerous and complex process, especially when customers face financial distress. Let us help.