A quartet of regulators, FCA, Ofgem, Ofwat and Ofcom have recently reaffirmed their joint commitment to increasing standards in debt collection activities. Their update comes as part of Debt Awareness Week 2024 and follows on from a letter they jointly published in June 2023, which set out their shared expectations as to how firms from their respective sectors should support customers in financial difficulty.
There is now no doubt that a safe starting position in collections is to assume that customers are highly likely to have characteristics of vulnerability. This position should be adhered to whatever governance regime applies. The 4 regulators mentioned all apply variations on a theme; the FCA quotes Consumer Duty and vulnerable customer requirements, Ofwat outlines ‘customer-focused licence conditions’, Ofgem’s are covered under its ‘Standards of Conduct,’ and Ofcom’s has its own ‘General Conditions of Entitlement’. There may be slight nuances in each of their wording, but they all require firms to have policies and procedures in place to ensure vulnerable customers are treated fairly.
As regulators are joined up in their requirements, all collections agents should be aware that customers experiencing collections activity are highly likely to exhibit other non-financial vulnerability characteristics. These could include problems with their physical or mental health. Customers with vulnerable circumstances often find it difficult to engage with creditors, and their vulnerabilities may be worsened if creditors take an inappropriate approach with them.
And inappropriate collections policies and behaviours can come at a significant cost to delinquent firms. It was only 4 years ago that the FCA fined 3 banks in the Lloyds Banking Group £64m for breaches in its Principles for Business due to their handling of mortgage customers with payment difficulties or in arrears. In the same subject area, a number of banks in the Barclays group were later fined £26m.
We would pose the question ‘which is the greatest cost to a business, the monetary fine, or the reputational damage caused by it?’ While the decision notices in each of those cases are clearly informative, regulators expect so much more now with specific requirements in respect of vulnerable customers, irrespective of the code of conduct that applies.
Rockstead is in a unique position to advise firms on debt collection best practices and our subject matter experts can guide firms in each of the areas covered by the most recent joint notice.
So our next questions are – ‘When was the last time you kicked the tyres with independent third line oversight of your policies and procedures?’ or ‘when did you last seek re-assurance that your colleagues completely comply with your requirements?’ Give us a call and ask for a copy of our ‘customer treatment on collections activity’ case study.