Debt collectors ‘must do more to help customers’

E: The Financial Conduct Authority has written a letter to debt collectors telling them to help customers more.

Debt collection agencies must do more to help customers that are struggling to make their repayments every month, according to the financial regulator.

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People who have fallen behind paying back what they owe can be harassed by creditors regularly – sometimes daily – to hand over money. This can be a distressing experience and can have a huge impact on every aspect of an individual’s life.

The Financial Conduct Authority (FCA) wants to put a stop to this and, instead, wants debt collection agencies to do more to help customers get out of the red and into the black. The organisation has penned a letter to the chief executives of these firms advising them that they need to carry out an annual review for clients that have agreed to a debt management plan (DMP).

According to the regulator, the annual review would make sure that any plan a customer agrees to is suitable to their needs and circumstances, which could save them money in the long run. It’s not just in a customer’s best interests, as the evaluation would mean clients can’t mislead lenders about their ability to repay their debts.

In his correspondence, Jonathan Davidson, director of supervision of retail and authorisations at the FCA, notes that the organisation has found ample examples of non-compliance in the administration of DMPs. This includes mistakes such as failing to maintain contact with customers and not terminating agreements when it is appropriate to do so.

He believes the findings are concerning as it puts customers at an increased risk. He wrote: “We have found that some firms have been allowing DMPs to continue for a number of years either without reviewing them or subjecting them to a limited review.

“This creates a risk because a person’s personal and financial circumstances most likely will change over time, and the more time that has elapsed since a customer last engaged in a review, the greater the risk that the information your firm holds about the customer is not reliable.”

Mr Davidson added that any advice that a debt collection agency gives a customer during an annual review must be given in a “durable medium” that can be recorded and retrieved at a later date in the future.

He explained that if a customer becomes unresponsive, then the company must take reasonable steps to encourage them to participate in the review process. Unless these actions are undertaken, then it would be difficult for the firm to demonstrate that its kept its end of the bargain. In addition, the agency is not allowed to simply carry out a “desk-based” review or rely on information that is likely to be inaccurate or out of date.

If you are struggling with debt and are living in Scotland, then you have several options when it comes to paying off what you owe. There are debt arrangement schemes (DAS) and protected trust deeds, which see a large proportions of the sum owed written off after a certain period of time. You can find out if you qualify for a trust deed here. There is also sequestration, whereby an individual transfers assets over to a trustee to satisfy creditors.