Although securing fair outcomes for vulnerable customers has long been a concern both the FCA’s and Ofcom, it has taken a global pandemic to really place it on the agenda of most unregulated businesses which are customer facing. This includes the debt collection and credit management industry, which although often touching customers when they are at their most vulnerable, surprisingly remains mostly outside of FCA regulation.
FCA authorisation is only required to collect debt under credit agreements, consumer hire agreements and regulated peer-to-peer loans, therefore most inhouse and third-party collection teams have no formal requirement to develop and implement policies and procedures around customer vulnerability and the debt collection process.
In February 2021 the FCA released its finalised guidance on the fair treatment of vulnerable customers. Whilst ensuring fair outcomes for vulnerable customers has been a key focus for the FCA since 2015, the FG21/1 Guidance makes clear that customer vulnerability should be considered across every part of the business, and that regulated firms will be held accountable to the standards set by the FCA Principles and Rules. Whilst still only holding regulated companies to account, the guidelines clearly highlight how the principles are applicable to all businesses and, as with the FCA Treating Customers Fairly Principle, are highly likely to be become the accepted standard across all industries.
Debt Collection to Debt Resolution
Despite the lack of formal regulation there has been a gradual move towards more responsible debt collection strategies across most of the industry. This has been driven by the growing understanding that market share is just as likely to be won on customer experience than on product and price and improved understanding of how and why people get into debt. It is now widely accepted that most people do not accumulate unmanageable debt out of choice, and that when they do, they would far rather settle it if given the opportunity and means. This has led to a shift towards finding ways to help the consumer resolve their debt position rather than just collect on it.
However, this shift in corporate priority will not address the needs of the most vulnerable and all businesses should have a social obligation and ask themselves tough questions about whether they are truly inclusive of all their consumers, or whether improvements could be made to ensure everyone can achieve a fair outcome.
The Barratt Smith Brown Customer Vulnerability and Debt Collection series of articles takes an in depth look the issue of customer vulnerability and debt collection to help debt collection teams:
- Ensure their staff have the right skills to recognise and respond to the needs of their vulnerable customers
- Have the communication, customer service and established processes in places to ensure vulnerable customer needs are met.
- Implement their customer vulnerability strategy across the business and then monitor and assess whether they are meeting and responding to the needs of customers with characteristics of vulnerability, and make improvements where this is not happening.
Read part 2: What is a Vulnerable Customer?
Ashley Barratt – CEO Barratt Smith Brown
Leicester based Barratt Smith Brown, has established a strong reputation for providing market-leading debt collection support to the utilities sector. Leveraging CEO Ashley Barratt’s 15 years of experience at Centrica, they have not only provided outsourced support to key industry players such as Business Stream, Bristol Energy and Shell, but have taken a lead role in managing collections for UK energy administration collections – handing over 75% of energy administration cases since 2018. Their expertise in energy administrations led to their key role in helping The Citizen’s Advice Bureau develop their Supplier of Last Resort – Good Practice Guide.