Who knows what forbearance means???
It is not a word that many of us would use on a daily basis, indeed had I heard one of my friends use it in the past I would have rolled my eyes and told them to use a normal word.
But forbearance has become an incredibly important word for our company and is one of the reasons why we have such a large group of loyal customers, and why we get recommended to others.
Forbearance is:
'The quality of being patient and kind towards other people, especially when they have done something wrong.'
This is the definition from the online site 'The Oxford Learners Dictionaries'.
Nowadays the world seems to be more and more data driven, we have all become numbers, consequently the actions we take are black and white to data analysers. In the finance industry, for example, a customer repays their loan to the terms agreed or they don't, and if they don't there will be consequences.
If I have a credit card, for example, and my monthly repayment is due on 20th of each month and I don't make a monthly payment I will get charged and it could possibly damage my credit record.
If I have a bank loan and I struggle with payments over a period of time I will get extra charges and possibly taken to court or passed to a debt recovery company which will result in extra charges and a damaged credit record.
The Financial Conduct Authority
https://www.handbook.fca.org.uk/handbook/CONC/7/3.html
The Financial Conduct Authority (FCA) recognise that especially now during the Cost of Living crisis many people struggle with repayments at various times during the life of the credit they have taken.
They urge firms to show forbearance. Their guidance on forbearance stresses:
- Early intervention.
- Tailored support.
- Fair treatment including freezing interest payments or waiving fees.
- Clear communication.
However if you search the internet for an explanation of forbearance you come up with the following key points about it:
As you can see in the real world forbearance very often has consequences for the borrower.
Notably:
- interest is still being accrued.
- there will be damage to the credit score.
And ultimately if payments are not resumed action will be taken.
My Home Credit Industry experience
I have worked in the Home Credit Industry for 30 years and my father 40 years before that. Over the years people have referred to us as Doorstep Loans, Cash Loans, Home Collected Loans. Up until Covid we were very much Home Collected Loans. Once Covid came and we weren't allowed to call at customers' houses for a while we developed more of an online presence through our website www.stewartfinance.co.uk. This continues through to today though we do still call at the customers who want us to.
The essence of what we do is still the same online or at the doorstep. We provide small affordable loans. Each customer is allocated an agent who is available anytime to answer calls or texts or to call at their home to discuss anything. What stands us apart from other industries (I believe) are our relationships with our customers. We get to know our customers, we speak to them on a weekly, fortnightly or monthly basis. I'll go into this deeper in another blog but today's is about forbearance.
You'll need to concentrate for this bit.
I believe we offer the best forbearance in any industry.
You might think our interest rates are high, typically £44 on a £100 loan but we NEVER add anything on. And we NEVER take a customer to court.
Our loans are over 24 weeks but a customer could take 24 years to pay and the total would be the same at £144!
The only consequence to a customer is that we probably wouldn't lend to them again!
One of the reasons why customers come back to us and recommend us to their friends is that they know exactly where they are and what they owe and they know that in this unpredictable world if something goes wrong we will be patient with them and understand what they are going through.
Here are a few examples:
Customer 1 can't pay as she has changed jobs. She will recommence payments next month.
Customer 2 can't pay because money has been taken out of her bank fraudulently. She will phone when she's got it sorted.
Customer 3 has asked if he can miss this week as he is taking the kids on holiday during half term.
Customer 4 has been off work sick so can't pay this month.
Customer 5 is in hospital and not sure when they are out. Account on hold till they get in touch.
Customer 6 has lost his job. He will phone when he is back in work or getting some money and will discuss a payment plan. We've told him to work out what he can afford to pay.
Customer 7 has split with her partner. She needs to pay a deposit on a flat so will miss this month.
Customer 8's car engine has broken and has cost a lot, she can't pay this month.
Customer 9 can't pay as her mother is sick and she needs to travel to see her.
Customer 10 is suffering with his mental health and is off work. We've put the account on hold and will speak again in a month.
All these customers have been good customers and at the time of the loan they passed all the affordability tests but life is so unpredictable and these events were unforeseen.
The customer journey can be a volatile one with many hurdles along the way. The philosophy in the Home Credit Industry is to be understanding of this journey and supportive. More often than not once life's events have calmed the customer will return to normal.
Obviously this isn't the case 100% of the time and on the odd occasion a customer will phone up and say their circumstances have changed to such a degree that they can't afford to pay anymore. In these circumstances we would point them towards a not for profit debt advice organisation.
I hope that gives a little perspective of what we see as forbearance. You might try and use it in a conversation today, but don't be surprised if your friends roll their eyes and tell you to use a normal word!
Authorised and regulated by the Financial Conduct Authority
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