INSIGHTS ¦ UKRN Joint letter on Debt Collection


Summary

The UK Regulators’ Network (UKRN) released a joint statement in March 2024, outlining shared expectations for debt collection practices across regulated sectors. Authored by leaders from the FCA, Ofgem, Ofwat, and Ofcom, the document aims to address consumer harms caused by current debt collection practices, focusing on the support and fair treatment of customers experiencing financial difficulties.

Key Points

  • The UKRN, including the FCA, Ofgem, Ofwat, and Ofcom, published a statement on shared expectations for supporting customers in financial difficulty.
  • The statement addresses consumer harms in debt collection, emphasising the need for regulated firms to adopt practices that do not cause harm to customers.
  • Identified harms include frequent collections communications, intimidating communication tones, and barriers faced by debt advisers.
  • Expectations for regulated firms include adjusting the frequency and tone of collections communications, making debt advice access clearer, and facilitating easier engagement between debt advisers and creditors.
  • The guidance draws from existing rules, guidance, and best practices across financial services, water, electricity and gas, and telecoms sectors.
  • Enforcement actions and regulatory powers will be employed to ensure compliance, with a focus on monitoring firm support for financially distressed customers throughout 2024.
  • The statement includes specific guidance for each sector, with emphasis on understanding customer vulnerability, communication practices, and collaboration with debt advice organisations.

Key Statistics

  • In 2020, the FCA fined firms a total of £90 million for poor treatment of customers in arrears, with over £570 million paid in redress.
  • Nearly £60 million in compensation was agreed to be paid to 270,000 customers by firms after reviews on the treatment of borrowers in financial difficulty.
  • Ofwat introduced a new customer-focused licence condition in February 2024 to establish high standards of customer service.
See also  [INSIGHTS]: What is Consumer Duty - in 90 seconds

Key Takeaways

  • Firms must ensure appropriate frequency and tone in collections communications to avoid consumer harm.
  • Regulators expect firms to provide clear and accessible information on free debt advice.
  • Debt advisers should face minimal barriers when engaging with creditors on behalf of clients.
  • Firms are expected to monitor and assess the needs of vulnerable customers and improve where necessary.
  • The Consumer Duty and Vulnerability Guidance set expectations for firm behaviour towards customers in financial difficulty.
  • Testing of debt collection communications is deemed appropriate to prevent harm.
  • Enforcement action and regulatory powers will be utilised to ensure firm compliance with these expectations.
  • The statement encourages firms to commit to delivering positive customer outcomes and continuing support for financially distressed customers.
  • Sector-specific guidelines outline obligations and best practices for treating customers fairly in debt collection processes.
  • The focus is on both preventing debt accumulation and managing existing debts in a supportive and empathetic manner.
  • Regulators highlight the importance of internal and external collaboration to facilitate customer access to necessary support.
  • Continued monitoring and review by regulators will ensure that debt collection strategies remain supportive and minimise harm to customers.


RO-AR insider newsletter

Receive notifications of new RO-AR content notifications: Also subscribe here - unsubscribe anytime