Regulators warn firms on debt collection

The FCA has combined with regulators Ofgem, Ofwat and Ofcom to warn firms about debt collection practices and set out the regulators’ expectations across markets. As many consumers continue to experience cost of living pressures and are increasingly susceptible to falling into arrears, the regulators have warned firms that their collection practices should not be causing harm to customers.

The regulators have advised that consumer harm can be caused in the following ways:

  • Customers experiencing financial difficulty receiving a high level of collections communications. This can often be compounded if customers receive these from multiple creditors across sectors, can harm their mental/physical health, and impair their decision-making and engagement.
  • Collections communications using a threatening or intimidating tone. This can decrease engagement of consumers and reduce the likelihood of repayment.
  • Free debt advice organisations finding their advisors face substantial barriers when engaging with creditors, including disproportionate efforts to contact the right people in the creditors’ organisation, with the potential of undermining customer engagement with these support services.

In response to these, the regulators’  expectations across the financial services, energy, water and communications markets are that creditors:

  • ensure customers in debt do not receive excessive communications;
  • use supportive language in their communications;
  • clearly signpost free debt advice; and
  • make it simpler for free debt advisers to contact creditors on behalf of clients.

The regulators have stated that strong action will be taken if firms do not meet these standards. In 2020, £90m were issued in fines for failures in firms treating customers in arrears, with over 250,000 customers receiving over £570m in compensation.

Harry Wells