How Regulators Are Coping with Soaring Cost-of-Living Debt?
Escalating focus on debt collection practices amid increasing cost-of-living pressures。The Financial Conduct Authority has partnered with its regulatory counterparts to take measures to strengthen consumer protection。
Amid rising cost-of-living pressures and escalating concerns about debt collection practices, the Financial Conduct Authority has worked with regulatory peers (Ofgem, Ofwat and Ofcom, among others) to develop a set of expectations for companies operating in different markets, with a primary focus on strengthening consumer protection measures。
Update Debt Collection Strategy
The collective initiative, which aims to address the economic pressures faced by consumers due to the rising cost of living, thus increasing the risk of defaulting on their debts, has at its core called on businesses to improve their debt collection strategies and provide better support to individuals facing financial difficulties.。
Expectations outlined include ensuring that indebted customers are not exposed to excessive communication, using supportive language in contacts, making clear that free debt advisory services are available, and simplifying channels for debt advisors to communicate with companies on behalf of their clients.。These expectations build on existing rules and guidance in the financial services sector, with the introduction of Consumer Obligations setting a higher benchmark for consumer protection.。
Regulators have stressed their commitment to take action against companies that fail to meet these higher standards.。Notably, in 2020, the regulator imposed fines totalling £90m on companies that were deficient in their handling of delinquent customer payments and paid more than £5 to affected customers..£700m in compensation。
Other measures to protect consumers
In addition, collaborative efforts between regulators and lenders have significantly improved customer treatment, securing nearly £60 million in compensation for about 270,000 customers.。In order to protect consumers from financial pressures in the current economic environment, we have taken other measures。
Lenders have been reminded of their obligation to provide tailor-made support to borrowers facing financial difficulties, while regulatory rules have been updated to align them with commitments outlined in the government's mortgage charter, designed to help customers worried about meeting their payment obligations.。Overdraft charges fully revamped, saving consumers almost £1bn。
In addition, debt solution providers are prohibited from charging referral fees to debt consulting firms to ensure that consumers receive higher-quality advice while avoiding unnecessary financial burdens.。Banks have been warned to improve their treatment of small business owners in the debt collection process, while insurers have been warned not to provide unnecessary products or add-ons, as well as unfair penalties to protect consumers.。
Disclaimer: The views in this article are from the original Creator and do not represent the views or position of Hawk Insight. The content of the article is for reference, communication and learning only, and does not constitute investment advice. If it involves copyright issues, please contact us for deletion.