MAKE YOUR CASE AUTHOR – Heather Greig-Smith is a freelance business journalist SINGLE ORRETURN? Should there be a single regulator for the debt collection industry? Heather Greig-Smith asks if change is needed to the way debt collection is regulated. The Recognised Standard / www.cicm.com / November <strong>2017</strong> / PAGE 32
COLLECTIONS businesses are subject to a wide range of regulation – from the rigours of the Financial Conduct Authority (FCA), to specific sector regulation for water, gas and communications suppliers. With the burden of compliance and the consequences of poor customer treatment higher than ever, is it time for a single system of regulation? EOS Solutions UK Chief Executive and CICM Think Tank member Stuart Knock thinks so. “It would make more sense if the practice of debt collection was regulated rather than the type of debt being collected,” he says. EOS handles both retail finance, which is regulated by the FCA, and utility debt – which does not fall under that remit. Stuart says in practice it is very difficult for collections businesses in this situation. “Utilities tend to talk about the authorisation standards but they don’t fully understand what FCA-authorisation means,” he adds. The cost of compliance for FCA-regulated businesses is significant: “On some utility panels you are up against some who only do utility debt so can be more competitive in their pricing, and more liberal about what they do and how they approach the debt.” PERFORMANCE DIFFERENCE Stuart says he has the impression from nonregulated creditors that there is a performance difference. “They must be more assertive in their negotiations. If there was one regulator across the piece that wouldn’t happen.” Any suggestion that firms behave in different ways for different debts is not acceptable, Stuart says, adding that the FCA does not expect that approach within businesses it regulates. With well over 90 percent of <strong>Credit</strong> Services Association (CSA) members FCA-regulated, some question whether there is really a problem that needs solving. “I think it’s a theoretical risk rather than an actual risk,” says Sue Chapple, Strategic Account Director at Indesser, the joint venture between the Cabinet Office and TDX that coordinates the collection of £22bn of public sector debt. “The standard in the market is FCA regulation, and in practice creditors are already looking for firms that abide by those standards,” she says. “It’s very easy to say there should be one standard but I can also see the cost and effort and impact in doing so. The fact that some companies have to be FCA-regulated moves everybody up – like Treating Customers Fairly (TCF) did – it just takes time.” Sue adds: “If you’re the owner of the debt and are using a DCA it’s up to you to make sure that DCA behaves appropriately. How you reward your agencies will drive their behaviour.” PRACTICAL ISSUES Even if it were desirable to bring all debt collection under one regulatory umbrella, the practicalities make it unrealistic, according to John Thompson, Head of Compliance at Hoist Finance. “There is some logic to having a single regulator, and a strong argument that it would bring a level playing field not only to the collections agencies, but also to the consumer, who will be treated fairly and consistently regardless of the ultimate creditor. But is it really practical? The FCA already has to regulate tens of thousands of firms in the consumer credit space, and is arguably already too stretched.” He adds: “<strong>Credit</strong>ors in the utilities sectors – water, gas, electricity – are heavily regulated in their own right, with consumer protection at the heart of what they do. It is right that we should be looking at the FCA’s experiences, and the work undertaken so far, to see what lessons can be learned, and whether a set of common principles could be adopted. “In our experience, agencies that collect both FCA-regulated debt, and debt that is often referred to (erroneously) as ‘unregulated’, tend “It would make more sense if the practice of debt collection was regulated rather than the type of debt being collected, EOS handles both retail finance, which is regulated by the FCA, and utility debt – which does not fall under that remit.’’ continues on page 34 > The Recognised Standard / www.cicm.com / November <strong>2017</strong> / PAGE 33
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