CCR-PUBLICSECTOR CCR-PS


THE continuing development of the Financial Conduct Authority’s (FCA) requirements and the future of how debt collection sits within the new regulations and guidelines is becoming increasingly removed from how a traditional collections function would have previously conducted their business. Whilst most accept that the changes


proposed are to the benefit of both customers and creditors alike, it behoves us to consider how this will change the face of what we would consider the traditional collection approach. Central to responsible lending is an assessment of customer affordability, this also applies to collections. Indebtedness and affordability


assessment should be carried out throughout the customer lifecycle;


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origination, customer management, pre-delinquency, collections and debt recovery. There is often limited monitoring of indebtedness or affordability criteria when assessing past decisions.


CONC 5 The rules are quite clear. CONC 5.3.1G deals with creditworthiness and sustainability and provides that, in making the assessments required of it, the firm should take into account more than the customer’s ability to pay. It should also take reasonable steps to assess the customer’s ability to meet repayments in a sustainable manner without the customer incurring financial difficulties or experiencing significant adverse consequences.


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Evidence of future increases in income


and decreases in expenditure may be taken into account if the repayments are expected to be sustainable in the light of those changes. Any assumption regarding future income should be reasonable and capable of substantiation in the individual case. The FCA has been strident in its view


that all creditors, whether they be lenders, debt purchasers, debt collection agencies, or short-term credit companies, have a responsibility extending throughout the customer journey to the final stages of collection and recovery. This has resulted in a compliance frenzy that has seen the focus of debt collection agencies’ operations move from how much they are able to recover to how they recover it.


June 2015


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