HC 271 Money Advice Service

Written evidence submitted by Arrow Global

Executive Summary

1. Arrow Global’s customer relationships and customer feedback suggest that the money advice sector is an important aspect of the consumer finance market:

a. Money advice is good for improving customer circumstances and outcomes, and

b. Money advice is positive in helping customers deliver better creditor outcomes.

Due to the diversity of customers in need and the diversity of money advisors available, the money advice marketplace is in need of substantial coordination and customer-positive regulatory guidance.

2. The Money Advice Service is well placed to play that critical marketplace coordination role for a service that affects a large percentage of the vulnerable customers and financially challenged customers in the United Kingdom.

About Arrow Global

3. Arrow Global is a leading debt purchaser in the United Kingdom and Europe. The company’s portfolio consists of a broad array of consumer and commercial credit, including credit card, personal loan, retail, motor, mortgage, telecommunication and utility receivables. With 3.8 million customer accounts and £7 billion under management (85% in the United Kingdom and 15% in Continental Europe), Arrow Global has substantial market experience with customers.

4. Arrow Global is an active member of both the Credit Services Association and the Debt Buyers and Sellers Group.


Settling of delinquent accounts pre-2008

5. Historically, Arrow Global and other creditors who purchased or serviced loans in delinquency pre-2008 observed more large customer payments and fewer forbearance payment plans.

Settling of delinquent accounts post-2008

6. In the last four years, those large payments have decreased due to tough economic conditions. Now, creditors are strongly aligned to working with customers to establish sustainable payment plans that provide for orderly and manageable repayment of debt.

Arrow Global’s operating model and market position

7. Arrow Global is compliance and customer driven, facilitated by advanced data management and analytics. The business combines proprietary analytical and data management capabilities with bespoke systems and processes to enable personalised account management and adherence to regulatory and compliance requirements throughout the account management and recovery process.

8. Arrow Global has approximately 3.8 million accounts representing circa £7 billion and substantial experience in working with customers and money advice businesses in this tough environment.

9. In our experience, data matching is a key step in ensuring a creditor not only knows that a customer advisor has been appointed, but that the customer advisor relationship is respected. Without data matching, customer advisor data is often less known or less reliable. We encourage the Money Advice Service to make data sharing and data accuracy a priority to avoid unnecessary complaints and customer hassle.

10. Arrow Global strongly supports, for both compliance and economic reasons, the efforts of money advisors to support customer circumstances and ensure the best advice is provided to handle customers in financial difficulty.

Arrow Global’s view of the money advice sector

11. Arrow Global’s data analysis shows that customers repay their debts better with the help of money advice. However, repayment rates vary substantially between customers using different money advice providers.

12. We believe that the Money Advice Service has an important role to play working with Debt Managers Standards Association (DEMSA) members, Consumer Credit Counseling Service (CCCS), Payplan and the rest of the money advice sector to help customers in need to find, and benefit from, the best advice for their circumstances.

13. Arrow’s experience is that a lead regulatory hand is needed on key money advice issues of fees, data sharing and data accuracy, management of client trust accounts, auditing, triage, cross-selling of products, customer benefit and outcome reporting, customer reviews, transparency issues, funding models, advice helplines, and other market issues. The Money Advice Service is best placed to coordinate a critical and fragmented market on these key issues.

14. We also support the Money Advice Service’s direct role in improving key customer supporting processes such as:

a. Education of the collections/debt advice community, for example working with the Royal College of Psychiatrists to develop Mental Health Training for Collection Staff

b. Education and awareness in the customer community

c. Development of online tools for customers, particularly their income and expenditure assessments.  If one version of the income and expenditure process could be universally agreed and adopted by the 3PDM/DMC sector there would be significantly more clarity in our industry.

15. Arrow Global’s data suggests there are circa £20bn of debt management plans with money advisors with circa 25% of the market in the free to client sector and 75% of the market in the commercial advice sector. These payment plans perform with different success rates and £20bn is a large loan amount affecting more than one million financially vulnerable consumers. Arrow Global’s data suggests these payment plans are a very important part of the consumer finance market and require meaningful regulatory coordination and oversight to ensure positive customer and creditor outcomes.

16. Arrow Global strongly supports a diverse and broad money advice sector that includes CCCS, Payplan, Citizens Advice Bureaux, DEMSA and other competent advisors under a robust regulatory framework. Arrow Global believes that the current strategies articulated by the Money Advice Service will improve the provision of money advice in the UK and will improve customer outcomes – if the Money Advice Service is fully supported to implement their strategies and recommendations.

17. Arrow Global’s evidence suggests that customers who get the benefit of money advice are better equipped to handle their financial commitments and hence deliver stronger financial outcomes to creditors with less stress or hardship on the customer.

18. Accordingly, Arrow Global does agree that creditors and lenders should rightfully pay for money advice services to their customers and the relevant coordination of those services by the Money Advice Service.

19. Arrow Global considers the Money Advice Service vital in coordinating the important service of high quality money advice, on reasonable terms, to vulnerable customers in need. To remove resources from the Money Advice Service in this difficult economic period, when more policy coordination is required, would leave consumers and creditors in a worse position.

June 2012

Prepared 15th June 2012