What is breathing space and how does it help us to better understand our customers?

Breathing Space is not only a legislative must for finance firms but also an invaluable tool for businesses. Have you ever considered it can not only be used to give your customers the time and space they require, but also help you better understand their needs and wants?

Let’s break it down.

In May 2021 the Government introduced a new legislation, ‘The Debt Respite Scheme Regulations 2020’, which was implemented to help struggling households cope with debt. Under these regulations there are 1 of 2 Breathing Space options available to customers.

The first option is ‘Standard Breathing Space’, which is a statutory breathing space period, allowing the customer time to seek advice for eligible problem debt. This lasts a period of 60 days, and a customer can only have one standard breathing space in a 12-month period.

The second option is ‘Mental Health Crisis Breathing Space’. It is similar in that it is a period of time which allows the customer to seek advice for eligible problem debt, however this is specific to customers who require mental health treatment. Unlike the standard Breathing Space option, this has no fixed end date.

So, how can we use Breathing Space to better know our customers?

Businesses such as Moneybarn have a vital role to play in supporting customers during challenging times, which is why Breathing Space is a great opportunity to help improve customer outcomes. The protection this legislation gives customers provides them time and space to stabilise their financial situation, engage with debt advisors and find a solution that best suits them.

Although you cannot communicate with customers regarding the protected debt during this time, you can still respond to complaints or customer queries, which could enable you to understand the struggles that a customer has been going through, and how better to support them in the future.

The way I see it, Breathing Space gives businesses the opportunity to better engage with customers, when the time is right. Truly get to know their situation, and support them in choosing the most appropriate solution. This could be brought to life in many ways.

 At Moneybarn we work regularly with debt charities to signpost our customers to free debt advice, including the most up-to-date help and support possible. We also ensure that Customer Support Agents are trained in how to deal with customers in financial difficulty, maintaining the mantra throughout all communications that we are here to help throughout their agreement. This in turn improves the overall customer journey as customers feel cared for and supported.

According to the most up-to-date Debt Justice data, we are in a personal debt crisis in the UK. The toll on mental health wellbeing was considerable in 2022, with over 1 in 2 UK adults, or 28.4 million people, feeling more anxious or stressed due to the rising cost of living.

Furthermore, the number of households struggling under a heavy debt burden has increased by two thirds since 2017. We can also see that based on the FCA Financial Lives survey conducted in 2022, that 12.8 million adults in the UK are falling behind on their bills or finding their repayments a heavy burden.

These statistics indicate that financial difficulties are a factor in the decline of the UK’s mental health, and we must continue to respond to our customers’ needs in suitable ways, such as the use of Breathing Space. We need to listen to what our customers are telling us and take action to support them with the tools you have available. Sometimes it’s just as simple as being human and helping those in need when they need it the most.

Financial Education

The question is, why aren’t we teaching children about financial education in school? Some see the learning of tax returns, mortgages, credit, and savings to be far more valuable than learning about Pythagoras theorem. Personally, I agree. Our partnership with National Numeracy shows us that as a nation, our numeracy levels are significantly below average. According to National Numeracy, this costs the UK economy millions of pounds in unemployment, debt, and the skills gap.

However, as we know this isn’t on the curriculum, then it really lies with those who do have the knowledge to share it. At Moneybarn we actively try to support with this already, getting to know our customers, whether that be through feedback, surveys, or on the phone, and truly getting to grips with the knowledge gaps that exist. As an industry, we could work together to bridge that gap and implement some level of core, helpful financial education.

Examples we’ve put in place at Moneybarn include breaking down complicated jargon and using Plain English, by avoiding the use of abbreviations and acronyms and explaining commonly used financial terms, such as APR. We also signpost customers to our sister companies, money management tool, Snoop, which allows users to track their spending and manage their money on a daily basis.

In conclusion, Breathing Space should be utilised where appropriate but can help with so much more than just supporting customers when they need it the most. It can also give organisations added insight into the lives of their customers, whilst giving them the chance to take a breather, seek professional debt advice, and bridge the gap in their knowledge of finances and how to manage them. In my opinion every company in financial services should see Breathing Space as a positive step forward enabling them to better support their customers.