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What has happened?

In March 2024, the FCA, together with fellow members of the UK Regulators’ Network (UKRN) Ofgem, the energy regulator, Ofwat, the water regulator, and Ofcom, the telecoms regulator, set out its expectations in a call for firms to improve their debt collection practices to avoid consumer harm.

What are the key points of the communication?

The FCA has set out (see the UKRN document available here) its expectations across markets, urging firms to:

• make sure customers in debt do not receive excessive collections communications,
• use supportive and non-threatening language to customers,
• clearly signpost the availability of free debt advice, and
• make it easy for debt advisers to contact firms on behalf of their clients

The expectations are based on the comprehensive rules and guidance already in place in financial services. The Consumer Duty set a higher standard of consumer protection, building on guidance for how firms should support vulnerable customers and borrowers in financial difficulty.

Where firms fail to meet the high standards expected, the FCA takes robust action. In 2020, it fined firms a total of £90m for failures in how they treat customers in arrears, with firms paying over £570m in compensation to customers. It has also worked with nearly 100 lenders to improve the way they treat customers in difficulty, securing almost £60m in compensation for 270,000 customers.

The document concludes by stating “We want firms to commit to delivering these outcomes and will continue to monitor how firms in our sectors are supporting customers in financial difficulty in 2024”.

To protect consumers dealing with the cost of living squeeze, the FCA has also:

• reminded 3,500 lenders how they should provide tailored support to borrowers who get into financial difficulty,
• updated its rules to support key commitments made by lenders as part of the Government’s mortgage charter, building on guidance for how lenders can help customers worried about keeping up with payments,
• overhauled overdraft charges, saving consumers nearly £1billion,
• banned providers of debt advice from receiving referral fees from debt solution providers, saving consumers struggling with debt thousands of pounds in unnecessary fees and ensuring they receive better quality advice,
• warned banks to improve the way they treat small business owners when collecting and recovering debts, and
• warned insurers to protect customers from unnecessary products or add-ons and unfair penalties.

How can we help you? 

Thistle Initiatives has supported lending and debt advice firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting firms as-and-when, our team of specialists can serve as your right hand in meeting and complying with FCA regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.

Are you looking for help with your debt collection or debt advice arrangements, or more general regulatory questions? Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 020 7436 0630 or sending an email to info@thistleinitiatives.co.uk.