Tag: Debt Collection

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FCA joins with other regulators to warn firms about debt collection

On 18 March 2024, the UK Financial Conduct Authority published a news story calling on firms to improve debt collection practices. All of the regulators feel that this is particularly important given many consumers continue to feel cost of living pressures.

The news story also includes links to:

– a joint press release; and

– a copy of the joint letter dated 18 March 2024.

This joint letter follows on from a letter published on 28 June 2023 (see the press release and the joint letter dated 28 June 2023).

The latest joint letter makes the following points for financial services firms:

– firms should start from the position that customers in collections are highly likely to have characteristics of vulnerability and should follow FCA’s expectations under the consumer duty (including its finalised guidance) and its vulnerable customer guidance;

– the consumer duty strengthens existing requirements;

– there is foreseeable harm if a debt collection communication sent the customers are perceived to be intimidating or unsupportive (and communications should be tested)

– firms may want to encourage ‘warm’ handovers between frontline and specialist teams; and

– the FCA aims to publish its policy statement before June 2024 on its response to Consultation Paper 23/13.

The FCA reminds financial services firms (and this point should not come as any surprise) that debt collection rules and guidance apply to both debt collectors and to lenders taking steps to recover payments due under credit agreements or consumer hire agreements.

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FCA publishes portfolio letter to debt purchasers, debt collectors and debt administrators

On 18 January 2021, the FCA published a ‘portfolio letter’ to debt purchasers, debt collectors and debt administrators.

The FCA identified seven key ways in which consumers may be harmed:

– firms failing to recognise and address the needs and challenges facing vulnerable consumers and failing to ensure they obtain the same fair outcomes as other consumers;

– consumers’ needs not being adequately assessed meaning consumers may not receive appropriate forbearance;

– consumers not receiving clear information about, or resolution to, their dispute or complaint and being incorrectly pursued for debts;

– firms taking disproportionate action when seeking to pursue a judgment (for example, seeking judgment where a consumer is vulnerable);

– firms continuing to seek or accept payments on extinguished debts; and

– firms exhausting all available resources, failing to meet its obligations and existing the market in a disorderly fashion.

The FCA said it will focus its work on:

– firms’ treatment of customers (particularly on vulnerable customers, forbearance and due consideration and disputed debts);

– firms pursuing litigation and unenforceable debts; and

– firms’ prudential resources.

The FCA has also reminded firms that when making a notification under Principle 11, firms should be aware of the requirements and guidance in SUP 15. These are important provisions which say, for example, that a notification should be made where there is a “significant” breach of the Consumer Credit Act 1974 and its regulations. The FCA also usefully gives some guidance on the types of situations where it expects to receive a notification.