Ready, debt, go: using automation to help our debt management customers

Of all the financial products we protect, debt management plans are probably the least well known. They're a relatively new area to fall within our protection – we've covered them since 2018.

If you’ve got money in a debt management plan with a debt management firm that goes out of business – and it’s authorised by the Financial Conduct Authority – we may be able to pay you compensation.

We can protect money that a debt management firm holds for you, but not any advice it gives you as this falls outside our remit.

Following their failure in 2019, Pentagon (UK) Ltd (Pentagon) and its sister firm Atlantic Finance (UK) Ltd (Atlantic) became the first failed debt management firms to fall within our scope of protection.

Although Atlantic itself was eligible, there wasn’t any evidence of a shortfall in customer money, which meant its customers didn't need FSCS to step in and pay compensation. Our investigation into Pentagon, however, found that although most of its customers didn't need our service, some were eligible because Pentagon had overcharged them certain fees. This meant we could step in to refund these fees.

Using automation to help our customers faster

Pentagon was one of the UK’s biggest debt management plan providers so we had a lot of data to work through. We recognised this as a great opportunity to use automation to work smarter and get Pentagon’s customers back on track much more quickly.

Determined to go above and beyond for our customers, our team created a new ‘automated eligibility tool’ that saved nearly two years in the time it took to handle compensation claims. This approach also saved us a staggering £1.5m in claims processing costs.

All the customer data Pentagon held followed the same structure, so we used our automated eligibility tool to analyse this large dataset to identify the people who were eligible for FSCS protection. The tool compared 13,000 debt management plans against Pentagon’s fee criteria and identified 112 customers eligible for compensation. It was then able to calculate exactly how much compensation each customer was due, saving even more time.

Our team then carried out a strict quality check of the eligible claims the automation had detected so we could be sure the automation's results were accurate before paying any compensation.

The benefits of automation

Constantly improving the service we offer our customers is something that everyone at FSCS is passionate about. As well as ensuring the eligible customers got their money back nearly two years more quickly, the automated eligibility tool also enabled us to pay compensation to people without them needing to make a claim themselves.

Customers often need to fill in an application form to apply for compensation. But in this case, we already held all the relevant information that customers would enter into an application form so there was no need for them to go through this process themselves. To be completely sure we held the correct customer information, we ran the data through a system called Equifax to ensure it was all accurate and up to date.

Not needing to make a claim themselves also meant that customers didn’t need to consider using a claims management company (CMC) to handle the claim on their behalf, so there were no CMC fees to pay. FSCS is always completely free to use when you come to us directly, whereas a CMC will charge a fee for using its service.

Another benefit of using automation is the £1.5m saving we made in claims processing costs. This has played a crucial part in helping to keep our operating costs as low as possible, which is something we’re always looking to do.

The future for debt management claims

We built our automated eligibility tool to capture the structure of debt management plans, which means we can easily modify and tailor it for future debt management failures. Using it to identify eligible customers and the amount of compensation they’re due means we can continue to help our customers much more quickly while making sure future failures cost as little as possible for our levy-paying firms.

While the benefits of automation are undeniable, we always couple it with rigorous human quality control checks to be completely confident the results are accurate. Our team constantly tests and reviews all our automation tools to make sure they produce the quality of results we expect and there's a robust sign-off process each tool has to pass.

Using automation and artificial intelligence to get claims decisions to our customers faster while saving money will continue to be a firm focus for FSCS. You can read about how we first started using AI last year to help us process claims, plus how our Resolution Data Lake has also drastically reduced how long it takes to get our customers back on track.