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Debt Management Firms Target Market

Thursday, February 04, 2016 - Posted by Philip Harvey

The targeted consumer that debt management firms is interesting to note, suggesting there may be scope for credit providers to limit the opportunities for debt management firms where they are detrimental to the consumer.

In the ASIC report into Debt Management firms (ASIC Report 465) a mystery shopper phone calls task was undertaken and provided the following likelihoods on products or services being offered by debt management companies, based on a consumers income level.

  • Very Low-Income profiles:
    Had no likelihood of being offered a product or service 
  • Low-Income profiles:
    A low likelihood of being offered a service or product in the 1st stage of hardship.
    This increased to a moderate likelihood in the 2nd stage of hardship.
  • Medium-Income profiles:
    A low likelihood of being offered a service or product in the 1st stage of hardship.
    This increased to a high likelihood in the 2nd stage of hardship.

  • High-Income profiles:
    A moderate likelihood of being offered a service or product in the 1st stage of hardship.
    This increased to a high likelihood in the 2nd stage of hardship.

Overall, it appears the debt management firms are targeting medium and high income earners. ASIC noted that only 50% of the mystery calls placed resulted in the offer of a product or service. The more a consumer is in hardship, the greater chance of a service being offered.

Where you are dealing with a debt management firm in credit control, whilst your customer is likely in hardship, it is evident that there is some capacity to pay the debt. These types of customers are arguably much better off in a well managed internal hardship service so they avoid the costly upfront fees typically associated with debt management providers.

The difficulty lies with pro-actively identifying these customers before they seek out a debt management provider. How do you effectively identify and communicate with this demographic?

The answer will vary depending on your organisation, with marketing efforts to make it known about the assistance of hardship to an existing client base one option.

Read ASIC Report 465 here.

 


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