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Debt collection regulations and compliance

Debt Collection Regulations & Compliance: What you Need to Know

Graham Bragg

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. 

Debt Collection Compliance Obligations 

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: 

  • The Consumer Credit Act (UK) 
  • OFT Debt Collection Guidance (Office of Fair Trading) for UK 
  • The Unfair Commercial Practices Directive (UCPD) issued by the EU Commission 
  • The Consumer Protection Code (Ireland). 

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. 

Debt Collection Regulations 

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. 

Collectors have to prove that you owe the debt in question  

They need written proof that you do in fact owe the money otherwise they have no grounds to enforce the debt collection. 

Debt collectors cannot harass or intimidate debtors 

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. 

Collections agencies cannot come to your home or place of work 

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. 

Debt Collection Agencies may not add any charges to the debt that have not been mentioned in the policy/contract  

These charges are also restricted by the relevant regulations of each country. 

Debt collectors cannot contact others about your debt

Debt collectors cannot contact family members, friends nor your employers. Only the person who owes the money can be contacted. 

They cannot pressure you to take a particular course of action  

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.  

Collectors can only contact you at certain times 

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. 

Debt collectors may not falsely claim authority they do not have 

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. 

They cannot imply that not paying debt is a criminal offence 

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. 

Creditors may take certain actions to recover debt 

  • Creditors and debt collection agents are allowed to track down a debtor to initiate collections. 
      
  • They can contact customers to send payment reminders and demands using multiple channels, e.g., by phone, letter, emails, text messages, etc. 
      
  • If it gets that far, collectors can take court action, but they need to inform their debtor in writing first and go through the required steps. 
      
  • To help recover the debt, creditors can organise meetings to work out payment plans. 
      
  • If all else fails having followed the formal steps, collectors may go through an official bailiff to seize assets. 
      
  • According to the regulations of each country, debt collectors may charge interest if it is in the policy or contract. 

Data Security Obligations 

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. 

How Debt Collection Software can Help you Stay 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.  

Conclusion 

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 messaging can help youremain compliant
while effectively recovering debt and empathetically engaging with your customers.

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