FCA CONSUMER DUTY
EMPOWERING CONSUMERS IN DEBT COLLECTION

COEO

Dealing with debt can be an overwhelming and stressful experience for many people. In December 2020, as we all know, the Financial Conduct Authority (FCA) proposed a new set of rules called the Consumer Duty, with the aim of bolstering consumer protection and promoting responsible practices in debt collection. The new Consumer Duty purpose was created to reshape the relationship between firms and consumers, ensuring fair treatment and empowering consumers to make informed decisions throughout the collections process.

Let’s look at the three core elements of the Consumer Duty:

1. Duty of Care: Debt collection companies and teams are obligated to act in the best interests of consumers, taking reasonable steps to prevent harm. Understanding consumers’ circumstances and vulnerabilities becomes crucial, emphasising empathy and respect.

2. Duty of Exercise: Skill, Care, and Diligence: Individuals involved in debt collection should possess the necessary skills and knowledge to provide appropriate advice and support. Consumers must be well-informed about their rights, repayment options, and the consequences of their decisions.

3. Duty to Communicate Clearly and Transparently: Clear, fair, and non-misleading communication is essential. Debt collection agencies, purchasers, and internal functions should present information in a manner easily understood by consumers, avoiding jargon and complex terminology. Explaining fees, charges, and repayment options clearly enables consumers to make informed choices.

The introduction of the Consumer Duty holds significant implications for debt collection companies and teams. Here are key aspects we need to consider:

1. Consumer-Centric Approach: Shifting the mindset to prioritize consumers’ best interests, considering their circumstances, vulnerabilities, and affordability. This approach encourages fair treatment and empowers consumers to make informed decisions about their debts.

2. Improved Training and Processes: Investing in training programs to ensure staff members possess the necessary skills and knowledge to comply with the Consumer Duty. Implementing robust processes to identify and address consumers’ vulnerabilities appropriately.

3. Enhanced Communication Practices: Clear and transparent communication is vital. Debt collection interactions should use plain language, avoiding technical jargon that may confuse consumers. Providing accurate and understandable information about debts, repayment options, and consequences is essential.

4. Adapting to Vulnerable Consumers’ Needs: Proactively identifying and supporting vulnerable consumers, rather than reactively. Establishing mechanisms to assess vulnerability and provide appropriate assistance, treating individuals with sensitivity and compassion.

In conclusion, the FCAs Consumer Duty represents a significant step forward in regulating debt collection companies and teams. By prioritising consumer interests, clear communication, and responsible lending practices, the Consumer Duty aims to ensure fair treatment and protect consumers in debt. This introduction reinforces the importance of empathy, transparency, and accountability in the debt collection process, ultimately leading to better outcomes for consumers in need of assistance.