FCA debt collection rules: Showing fair treatment in collections

For firms carrying out relevant consumer credit activity in the UK, FCA rules and guidance shape how customers in arrears, default, and recovery should be treated.

The FCA’s Consumer Credit sourcebook, known as CONC, includes rules and guidance on arrears, default, and recovery. Consumer Duty sits alongside those requirements and raises the standard of care firms within scope should provide to retail customers.

This doesn't mean there's one script, one workflow, or one payment option that works for every customer. It means collections teams need clear processes that help them communicate fairly, recognize when a customer needs support, manage exceptions, and keep reliable records of what happened.

This article provides general information only and isn’t legal advice. FCA requirements can depend on the firm, product, customer, activity, and facts of a particular case. Firms should review their obligations with qualified legal and compliance advisors.

Where FCA expectations show up in collections

FCA expectations affect more than the moment a collector calls a customer.

They can shape how firms manage:

• Customers in arrears or default
• Communications and customer contact
• Payment arrangements and forbearance
• Financial difficulty and vulnerability
• Complaints, disputes, and account queries
• Interest, fees, and other account treatment
• Third party agencies and outsourced service providers
• Customer records, quality assurance, and outcome monitoring

The practical challenge is consistency.

A firm may have clear policies, but those policies need to reach the right people and change the right process. If a customer raises a dispute, discloses financial difficulty, or asks for support, the next action should reflect that information.

When it doesn't, the risk isn't only a poor customer experience. It can also make it harder for the firm to show that its collections process is working as intended.

CONC 7 and collections conduct

CONC 7 covers arrears, default, and recovery for relevant regulated consumer credit activity. It includes rules and guidance that are relevant to lenders, owners, and debt collectors dealing with customers in or approaching arrears or default.

It's tempting to reduce FCA collections requirements to a short list of communication rules. This misses the point.

Fair treatment in collections depends on the full account journey. Teams need to consider the customer’s circumstances, the information they've already provided, the type of account, the stage of arrears, and the support or escalation route that may be appropriate.

A sound collections process should help teams:

• Give customers clear information about their account and options
• Avoid misleading or unnecessarily pressuring communications
• Handle disputes, complaints, and account queries through a defined process
• Respond appropriately when a customer shares information that affects their ability to pay
• Keep customer records up to date
• Make sure relevant information reaches the next person or workflow
• Escalate cases that need specialist review
• Manage third party activity with appropriate oversight

The exact controls will vary by firm and product. The important part is that teams understand how their policies apply in practice.

Fair treatment starts with the customer’s current circumstances

A standard collections process can work for straightforward accounts. It may not be appropriate when the customer’s circumstances change.

For example, a customer may:

• Miss a payment after a short term cash flow issue
• Need to discuss a payment arrangement
• Raise a question about the balance
• Make a complaint or dispute the debt
• Report a change in income, health, or family circumstances
• Ask for contact through a different channel
• Work with a debt adviser or authorized representative

These events should not disappear into a call note.

Collections teams need a clear way to record relevant information, decide who needs to see it, and make sure it affects future communications and account treatment where appropriate.

That doesn't mean every customer needs a completely bespoke path. It means firms should avoid applying the same action to every account when they already know there's a reason to do something different.

Communications need to be clear and connected

Customers need to understand why they're being contacted, what's happened on the account, and what they can do next.

A collections message should make it easy to find:

• The account or payment the message relates to
• The current issue or next step
• Relevant payment or support options
• A route to ask a question or raise a dispute
• A way to tell the firm about a change in circumstances
• Information about where to get further help, where appropriate

The information also needs to stay consistent across channels.

A customer shouldn't receive a letter that says one thing, a text message that says another, and an agent who can't see the latest payment arrangement or complaint. When communications, account records, and workflows are disconnected, customers are often left to sort out the confusion themselves.

For more on this area, read Consumer Duty and collections communications.

Consumer Duty and fair treatment

Consumer Duty applies to firms, products, and services within its scope. It requires firms to act to deliver good outcomes for retail customers.

The Duty includes three cross-cutting rules. Firms should:

• Act in good faith
• Avoid causing foreseeable harm
• Enable and support retail customers to pursue their financial objectives
  

For collections teams, these principles help test whether a process is working as intended.

Consider a customer who has told the firm they're struggling financially. Does the next communication reflect that? Can they find the right support without repeating the same information? Does the process create unnecessary barriers or pressure? Can the firm explain why a particular action was taken?

Consumer Duty doesn't replace CONC. It gives firms another reason to look closely at the customer outcomes their collections processes create.

For a broader explanation of the Duty, read Consumer Duty in collections and recovery.

Vulnerability needs a clear support process

Vulnerability is one area where fair treatment has to be more than a general statement.

A customer may disclose financial hardship, bereavement, illness, reduced income, a caring responsibility, a communication need, or another change in circumstance. This information may mean the standard collections route is no longer suitable.

The FCA expects firms to identify customers in vulnerable circumstances and provide support that meets their needs. Its Consumer Support outcome includes an expectation that firms design and deliver support for customers with characteristics of vulnerability, then monitor whether customers are receiving the help they need.

For collections teams, this may involve:

• Giving staff a clear way to record relevant information
• Routing the case to a specialist team or review process
• Adjusting communications where appropriate
• Pausing activity while the customer’s situation is assessed
• Making sure authorized representatives or debt advisers can engage through an appropriate process
• Avoiding repeated requests for the customer to explain the same circumstances
• Monitoring whether the support route is working

Technology can help make information and workflows more consistent. It doesn't replace staff training, human judgment, or the care needed in sensitive conversations.

For a deeper look at this topic, read FCA vulnerable customer guidance for collections teams.

Third party agencies still need oversight

Many firms use third party collection agencies, law firms, contact centers, or other service providers.

Outsourcing an interaction doesn't remove the need to consider customer outcomes.

Firms should be clear about:

• Which accounts can be placed with a third party
• What customer and account information the agency receives
• How hardship, vulnerability, disputes, and complaints are communicated
• Which communications and support routes the agency can use
• How the agency records activity and shares updates
• How the firm monitors quality, complaints, and exceptions
• What happens when an issue needs to be brought back in-house

A customer generally sees the third party interaction as part of their relationship with the original firm. The standards applied to that interaction should reflect that reality.

What firms need to evidence

FCA expectations aren't limited to whether a policy exists.

Firms need to understand whether their collections processes are producing the outcomes they expect. That means looking at what happens after a policy is put into use.

Useful sources of evidence may include:

• Customer communications and account history
• Complaint themes and root cause analysis
• Quality assurance findings
• Call reviews and agent feedback
• Data on repeat contacts and unresolved customer journeys
• Records of hardship, vulnerability, disputes, and escalation outcomes
• Third party performance and exceptions
• Process changes made after an issue was identified

An audit trail can support this work. It doesn't prove compliance by itself. Firms still need to interpret the evidence, identify gaps, and take action when a process isn't working.

Be confident with your compliance

The FCA demands clear evidence that you treat vulnerable customers with fairness and care. That’s why compliant collections solutions are so valuable. They give you the agility to adapt, the visibility to prove your actions, and the tools to treat customers in a way that builds trust and loyalty.

At C&R Software, that’s exactly what we’ve built into Debt Manager and FitLogic. Debt Manager’s configurable workflows and segmentation capabilities let you adapt treatment paths for every customer, while FitLogic’s decisioning power helps you spot vulnerability earlier and simulate strategies before they go live.

Together, they give you the confidence to face increased FCA scrutiny and the ability to show, in every interaction. To find out more, contact us at inquiries@crsoftware.com.