Currently, consumers are up to their eyeballs in debt and often have multiple creditors knocking on their doors.
As Joanna Elson, the chief executive of the charity Money Advice Trust (in The Guardian, 30 Aug 2022), said
“For many households, options are already running out, with more turning to credit to cover essential needs."
Since the pressure is on, consumers need to know their rights and obligations, and creditors need to abide by the regulations that govern the credit and debt collection industry. They should also want to recover debt in the most effective and ethical way.
From a creditor’s point of view, knowing the regulations around debt collection keeps them compliant and on the right side of the law.
Creditors are obliged to adhere to such laws and directives as:
Besides the law, there are ethics and real people with real debt problems involved. Debt charities and government groups, such as Citizens Information in Ireland, and StepChange, Money Helper and Citizens Advice in the UK, stand by to help people escape destructive debt.
If a dispute cannot be resolved, organisations like the Financial Ombudsman Service, Prudential Regulation Authority or Financial Conduct Authority (UK) can be called in.
On the flip side, debtors need to know their rights as consumers to avoid being exploited. Creditors are well within their rights to try to take certain actions to get their money, however, the public is protected by the law from harassment.
These are the main regulations that are in place in the EU and UK, but they vary from country to country.
They need written proof that you do in fact owe the money otherwise they have no grounds to enforce the debt collection.
Contacting a debtor several times in a single day or an excessive number of times is harassment.
Also, creditors may not go after you on social media or humiliate you in a public space. Of course, collectors can in no way use aggressive or threatening language, or physical violence.
Unless specifically agreed, collection agencies cannot show up at your door - but a bailiff or debt solicitor can. Debt Collection Agencies (DCAs) cannot start taking your assets and cannot threaten to seize your goods to strong-arm you into paying. However, DCAs can propose payment plans to settle the debt.
These charges are also restricted by the relevant regulations of each country.
Debt collectors cannot contact family members, friends nor your employers. Only the person who owes the money can be contacted.
For example, they can’t urge you to sell your home or get a loan from somewhere else to cover your debt with them or force you to pay off in bigger instalments than you can afford.
Debt collectors can only contact you during specific hours, which are usually between 8:00 – 21:00, Monday to Saturday (country dependent). They may not repeatedly contact a person in a single day as this is considered harassment.
DCAs may not claim they have legal powers or use false documents with official-looking logos as they have no legal power in themselves –that level of authority lies with the bailiffs.
Only in a few circumstances, and as a last resort, is unpaid debt a criminal offence. For example, in the case of criminal fines, unpaid council tax (England), business rates and child maintenance arrears owed to the CSA.
Any organisation that handles their customers’ personal data is obliged by law to put rigorous data security actions in place. In the EU, the General Data Protection Regulation (GDPR) protects personal data and the rights of EU citizens, while the Data Protection Act in the UK covers similar territory.
Being vigilant about ICT risks and cybersecurity is equally important. In the EU and in individual countries, there are several cybersecurity legislations at multiple levels that financial institutions must abide by. The most over-arching legislation for financial organisations is the Directive on Security of Network and Information Systems (NIS).
What about ISO 27001?
"ISO 27001 is the only auditable international standard that defines the requirements of an ISMS (information security management system). An ISMS is a set of policies, procedures, processes and systems that manage information security risks, such as cyber-attacks, hacks, data leaks or theft." (IT Governance UK) All organisations that deal with customers’ data should be ISO 27001 compliant.
By encoding compliance rules into the debt collection software, creditors and debt collection agents can be sure they are following regulations. During the software configuration stage, compliance experts within the company can make sure everything is above board and the app itself can prevent unlawful actions from going ahead by building checks into the workflow.
The collections technology used also provides a secure audit trail that can be inspected if needed as all communication between debtors and creditors can be recorded.
Conversational AI messaging technology allows companies to engage their customers in a more relational, two-way conversation that can recognise intent and pick up the vulnerability level of their customers. This helps guide the conversation to a successful outcome and works with the person to help resolve their debt issues.
If both parties play by the rules, the outcome will be better for all. Knowing your rights as a consumer empowers you, especially in your situation makes you vulnerable to abuse. And it also empowers the creditors and forces them to find an effective, empathetic way to recover debt that does not infringe on individual rights.
Contact us to find out how Webio's conversational AI platform can help you remain compliant while effectively recovering debt and empathetically engaging with your customers.
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