From time to time, I like to pick up on key regulatory matters that affect CCTA members and our sectors. I think we can all agree that there has been a lot going on in Q1 2024, from a regulatory perspective. First, the Financial Conduct Authority (FCA) announced a review into motor finance commissions and applying temporary measures for complaint handling timeframes in the sector.

This was then followed by a warning to firms on anti-money laundering concerns, a review of firms’ treatment of vulnerable customers, another ‘Dear CEO’ letter and, finally, a joint warning from regulators around concerns about debt collection practices. It is the last of these points that I would like to cover.

I am sure many of you will be aware that the FCA, along with other industry regulators (Ofgem, Ofcom, Ofwat) recently issued a joint letter addressing concerns, in their respective industries, about firms’ debt collection practices.

Jointly, these regulators have said that consumer harms in debt collection practices result from consumers being inundated with communications when they are in financial difficulty, those communications having intimidating or threatening tones and their debt advisors/organisations having unnecessary barriers when engaging with creditors on behalf of the customer.

Contributing on behalf of the FCA, Sheldon Mills highlighted the concerns within the financial services sector. This part of the letter states that the FCA has concerns in several areas, which include, inadequate consideration for customers with characteristics of vulnerability, the perceived intimidating and unsupportive nature of communications, inappropriately testing around communications and the CONC requirements around contacting consumers at unreasonable times and intervals.

The letter fails to clarify the communications that their concerns relate to. As you will all know, there are statutory communications that creditors must issue in accordance with legal and regulatory requirements. These are documents such as Default Notices and Notice of Sums in Arrears (NOSIAs). The legal requirements in respect of such statutory communications are prescribed in legislation, therefore, creditors cannot amend the frequency and tone of these communications. Timescales for issuing them and the wording contained within these are mandated.

What these regulators are therefore referring to is the communication with consumers beyond these required communications, such as additional letters, telephone calls, emails, texts/SMS, and visits (if applicable).

The quicker and easier you make it for consumers and their representatives to address debt and vulnerability matters, the less time and effort you will put into managing and maintaining those accounts going forward.

The letter also includes communications sent out by any outsourced debt collection services providers that a firm may use. Remember, firms have a duty to ensure that their suppliers are also meeting regulator expectations. Consequently, it is a good reminder to go back and revisit some of these aspects.

Considering this letter, firms should now be asking themselves a few specific questions. I know many firms will have reviewed their communications under the Consumer Duty implementation phase, but have you reviewed the frequency of your communications? The tone? And have you tested all these before implementing?

Yes, you may have improved the language to aid consumer understanding but are you monitoring the success of each channel of communication? Is your telephony approach working?

If applicable, are your debt collection visits working? Have you considered the frequency, tone, and success of your outsourced debt collection service providers? These matters are what the regulators want you to get right, so that consumers who are in financial difficulty or vulnerable situations are supported and have an avenue to gain the right support and guidance.

As Sheldon Mills highlights, customers in collections are highly likely to have characteristics of vulnerability and firms should be acting in accordance with the expectations outlined in both the Consumer Duty and the FCA’s Guidance for fair treatment of vulnerable customers.

For those that have not done so, test your communications, monitor their effectiveness from a consumer perspective, train staff to support consumers as much as possible and ensure third parties acting on behalf of consumers (family members, debt advisors, health professionals and so on) do not face unnecessary barriers when they attempt to engage with your firm.

My view is that the quicker and easier you make it for consumers and their representatives to address debt and vulnerability matters, the less time and effort you will put into managing and maintaining those accounts going forward.

Given the focus on debt collection practices from various regulators, we will soon be running a webinar on debt collection and meeting FCA expectations. This will be a live learning session for staff and team managers, hosted via our CCTA Academy. Look out for further details in due course.