ALMO's risk arrears over inflexible Direct Debits

Fewer than 30% of Arms-Length Management Organisations (ALMOs) offer a paperless sign-up for direct debits and fewer still offer their tenants collection dates on any day of the month – significantly hampering take-up and risking arrears under Universal Credit, payment specialists allpay has warned.

The group – which processes payments for more than 500 social landlords and a third of UK local authorities –  said the figure is more concerning for stock-holding local authorities, with less than 20% offering a paperless facility and just 4% offering collection dates on any day of the month.

According to the Housing Quality Network’s Rent and Income Excellence Network (RIEN), social landlords moving to any day direct debits have increased take-up by up to 20% and preparing for Universal Credit has been cited as a significant factor.
Additionally, paperless direct debits allow for payment arrangements to be set-up immediately over the phone or online by residents, reducing staff time, administration and errors associated with paper processing.

Two ALMOs that have moved to paperless, any-day processing through allpay, Kirklees Neighbourhood Housing (KNH) and Your Homes Newcastle (YHN) have increased the take-up of direct debits by more than 100% since implementing paperless, any day facilities. Both organisations cited the increase in flexible collection dates and frequencies, and allowing multiple users to set-up and manage direct debits in the office and out in the field via a cloud-based platform, as key factors.

Michelle Martin, account support supervisor at 23,000-home Kirklees Neighbourhood Housing said: “Since working with allpay we have increased direct debit take-up among residents from 3,000 to 8,500. As this system is paperless, instructions can be set up online in minutes and the choice of any day collections and multiple frequencies has been crucial to increasing take-up.”

While 26,000-home YHN has increased take-up from 3,500 tenants to nearly 8,000.

Maureen Grainger, Income Team Manager at Your Homes Newcastle, said: “Before using allpay, direct debits were managed by a central income team, but due to allpay’s platform being online with secure log-in we have now allowed all 40 income officers access to the secure portal allowing them to set up and manage direct debits with customers which has really helped to increase the take-up.”

Analysis by allpay shows that social landlords moving from limited collection dates and paper processing can save more than £40,000 per annum by implementing paperless, any day facilities.

The savings come from reduced staff time, reduced transaction costs through increased take-up and a reduction in arrears through offering greater flexibility on collection dates and frequencies.

Nick Peplow, allpay’s bill payment director, said ALMOs and stock-holding local authorities could improve their direct debit take-up among rent payers significantly by increasing collection dates and moving to paperless processing.
He added that at a time when ALMOs and local authorities were looking to increase take-up, reduce administration and costs, outsourcing direct debit collections ticked all the boxes.

He said: “Using an external provider for any day, paperless direct debits results in much of the resource intensive elements falling onto the external provider and is proven to increase take-up. The ALMOs we are working with have more than doubled take-up in less than three years. To have achieved this internally would have resulted in extra staff, IT and compliance costs. Through allpay, the functionality is available immediately and they’re futureproofing their income collection for Universal Credit.”