Compliance is key in the Collections process
In recent months there may have been a subtle shift in the perception of the debt collection industry with the OFT and other regulators delaying consultations on proposed reform after successful lobbying by the credit industry. However the regulators have increasing powers to fine and issue penalties for breaches of the rules and it seems to be a debtor litigation society made easier with the growth of online discussion forums and advice. So as a DCA it's imperative that you are fully aware of industry legislation and codes of practice you need to be compliant with and make sure you take a smarter approach in which debtors you take court action on.
DCA's are bound by the CSA code of practice and the OFT debt collection guidance (which is being updated and due out this summer) which lays guidelines to protect debtors from unfair business practices. With the potential new role of a Consumer champion in the industry, adherence to these will possibly come under greater scrutiny.
Being compliant when dealing with debtors
- Data protection - one of the key areas you need to be compliant in is around data protection. There was a clamp down last year when the OFT believed some tracing agents were breaching rules by leaving messages with neighbours of debtors they were attempting to trace. You must not disclose or discuss debt or debtor details without first establishing that the person you're dealing with is the debtor, or is acting on their behalf. Any data that is passed to you from a client regarding a debtor must be relevant and necessary and only used for the purpose of pursuing the debt. This obviously applies to any third party you're also using to whom you supply debtor details.
- Treating customers fairly - this is a hot issue currently especially given the current climate where there is in an increase in the number of people in debt and supported by the fact, a consumer advocate role is looking to be set up to ensure consumers get a fair deal. We ensure all our communication is clear, not misleading and accurate and we're clear on who we are and why we're contacting them. There are also guidelines you must follow around when and how you can contact debtors, what constitutes harassment and how you communicate with them. You also need to be upfront on any charges eg court costs they may be liable for
LRC take this extremely seriously and have sent a selection of their case officers on a Consumer Credit Counselling Service training course to better understand and emphasise with debtors.
- Misrepresentation - You must not threaten action that you have no intention or the ability of following through or falsely imply or state that the action can or will be taken when legally it cannot. For example you can't threaten the use of a Charging Order if the debtor is not a homeowner or bankruptcy if the debt balance is to low. If you do threaten a certain course of action then you need to genuinely believe you will get it granted. However in this climate some judges are less likely to grant certain orders. The CAB have also commented on the "overzealous" use of Charging Orders by some creditors as a business practice to intimidate people in financial difficulties to pay more than they reasonably afford which has brought this issue into the spotlight.
Being compliant with internal policies and procedures
From an internal point of view you need to make sure that your own business practices and processes are compliant.
- Know your debtor - it's key that you have all the information you can on your debtor to make the right decision. For example you cannot look to issue an Attachment of Earnings if they're self employed. By using all the information you have you can be much smarter about which course of action is best suited.
- Communication - you need to ensure all your communication with the debtor is compliant by looking at the language and wording used and what they imply. Also make sure you're aware of all new legislation such as the 30 day moratorium when contacted by a non charging advisor on behalf of a debtor and the fact we have to provide a list of debt advice organizations on our LBA's.
- Managing 3rd parties - you should always check the bona fides of all your external debt collection partners for example trace agents and doorstep collectors and ensure they follow DPA rules. Also when there's any new legislation regarding those industries that they have confirmed to you that they are adhering to the new rules eg the new guidance on tracing debtors. It's also key to ensure you are compliant with DPA regulations when working with other types of companies such as software or payment partners where debtor personal information will be passed to them.
- Information and security - From a compliance point of view all your systems need to be secure and have back up facilities. This is key for LRC in regards to our online Debt Manager where information on all clients'cases and debtor information is held. We also have to adhere to other regulations such as credit card compliance - where we agree not to hold debtor's credit card details for any longer than necessary when taking a payment.
In summary
Debt collection agencies are legitimate businesses and have a legal right to attempt to collect debts however it is imperative that they remain compliant at all times when dealing with debtors and also in their own internal business processes. Remember that penalties given by the regulators can result in damaging publicity or even non renewal and loss of credit license and with the new role of consumer champion on the horizon, compliance will continue to be a hot topic in the industry.
