Today’s debt collection industry faces increasing regulatory scrutiny. In the United Kingdom, the recent Consumer Duty regulations have intensified the focus on fairness, transparency, and empathy for consumers, adding another layer of complexity to the collections process.
However, it’s important to keep in mind that the Consumer Duty isn’t just another regulatory obligation. As we’ll explore in this article, Consumer Duty principles present a powerful opportunity for creditors to enhance their reputation and effectiveness by taking a newer and more dynamic approach to credit risk management.
What is Consumer Duty?
Recently, the UK’s Financial Conduct Authority introduced the Consumer Duty framework. This regulation is designed to enhance consumer trust by setting higher standards for providers operating in the financial industry. Its rules apply to all firms involved in the manufacture and supply of products and services to retail consumers, even if they don’t have a direct relationship with that consumer.
The Consumer Duty rules represent a significant shift in regulatory expectations for organizations operating in the United Kingdom. Creditors must establish good practices to support customers across four key outcomes:
- Products & Services: Demonstrate support and evolve services to address continually changing customer needs
- Price & Value: Offer fair value to consumers and act as partners in financial recovery
- Customer Understanding: Provide clear and effective information to ensure customers can make properly informed decisions about their financial health.
- Customer Support: Deliver appropriate support mechanisms so teams can provide both responsive and empathetic service
By enhancing consumer protection and promoting fair treatment in financial services, the FCA aims to deliver good outcomes for retail customers. Firms must follow Consumer Duty requirements, act in good faith, avoid causing foreseeable harm, and support customers to pursue their financial objectives at every stage of the financial lifecycle.
How does the Consumer Duty impact collections?
While the Consumer Duty has a material impact on everything from investment services to insurance to consumer credit, it’s especially relevant within the field of debt collections.
Helping consumers achieve their financial goals is key to establishing compliance with Consumer Duty regulations. In practice, that involves identifying and mitigating potential risks, maintaining clear and honest communication with customers, and providing appropriate support at every stage of the credit-risk lifecycle.
- Fair Treatment & Value: Firms should design their processes with the aim of treating everyone fairly, placing a particular focus on identifying and supporting vulnerable customers.
- Clear Communication: All letters, calls, and digital communications should be clear and easy to understand, without causing any unnecessary stress and confusion for customers.
- Avoid Foreseeable Harm: Collections teams should reassess their collections tactics, taking the frequency, timing, and tone of their interactions into consideration.
- Support Customer Objectives: Firms should offer more flexible repayment options or signpost debt advice services to help customers achieve their financial goals.
- Fair Value: Fees and charges associated with collections should represent fair value to the consumer.
- Product & Service Design: Collections efforts should be designed with customer needs in mind, with tailored approaches to different segments.
- Customer Support: Firms should provide easier ways to get in touch by adding extended hours or new communication channels when needed.
- Data & Monitoring: Firms should deploy enhanced data collection and analysis to monitor customer outcomes and demonstrate compliance.
- Staff Training & Culture: All employees should be prepared to understand and implement the principles of the Consumer Duty.
- Technology & Process: Investing in new technologies or updating existing systems empowers teams to deliver more nuanced customer care.
- Governance & Oversight: Senior managers should be held accountable for compliance to increase internal scrutiny.
- Third Party Oversight: Firms should ensure DCAs and other partners are complying with the regulation through rigorous vetting and monitoring processes.
- Forbearance & Flexibility: There should be a growing emphasis on offering forbearance options and more flexible repayment arrangements to support good customer outcomes.
Industry leaders are finding additional ways to create value within the Consumer Duty framework. In fact, by demonstrating their commitment to the fair treatment of vulnerable customers, some organizations have transformed their compliance practices from a regulatory obligation to a strategic asset.
According to the January 2025 UK Customer Satisfaction Index (UKCSI), only 64% of consumers feel that the organizations they interact with genuinely care about them. By adopting more transparent and ethical collections practices, forward-thinking providers have an opportunity to enhance their reputation in the marketplace.
In a world where 73% of customers would consider leaving a brand after one bad experience, a customer-centric approach is an essential part of any retention strategy. Supporting good outcomes in accordance with the Consumer Duty principles can inspire the kind of confidence and loyalty that lasts a lifetime.
Legacy systems make it difficult to stay compliant
Unfortunately, creating an implementation plan for the Consumer Duty has presented collections teams with a variety of challenges. As they’ve discovered, it’s not always easy to balance commercial interests with consumer protection.
One of the primary hurdles to effective implementation is training staff to meet the new and changing standards. The Consumer Duty emphasizes the importance of ensuring customers' long-term financial objectives are met, which necessitates a deep understanding of their needs and vulnerabilities. Collections teams must be equipped with the right tools to identify and address these needs effectively.
Creditors have also struggled with adapting existing collection processes to align with these new regulatory requirements. Most legacy systems aren’t prepared to support the more personalized and responsive customer interactions required by the law. Without the ability to handle nuanced customer data, these systems can’t provide teams with the real-time insights they need proactively manage customer outcomes as required by the Consumer Duty rules.
Similarly, implementing robust monitoring and reporting mechanisms has proved difficult for some providers. The Consumer Duty requires financial institutions to submit an annual report detailing their monitoring results, evidence of any poor outcomes, and strategies to mitigate future risks. Unfortunately, few legacy systems can collect such comprehensive customer data on their own.
Overcome complex challenges with cutting-edge solutions
Ultimately, technological innovation is key for creditors looking to maintain compliance with the Consumer Duty. The right tech stack empowers teams with to monitor outcomes, tailor outreach, and provide real-time support.
Early Intervention
Decisioning platforms ingest vast quantities of customer data to identify and segment customers for early treatment in the debt lifecycle.
With a modern collections solution, teams can communicate with those customers in a fair and consistent manner, offering forbearance programs and flexible payment arrangements to encourage the best customer outcome.
Reasonable Communication
Some modern debt management and collection solutions integrate communications tools to simplify the creation and management of digital outreach.
Teams can configure these platforms to execute communications strategies in a consistent and fair manner, leveraging advanced decisioning rules to tailor to specific customer segments when required.
Customer Support
Credit decisioning platforms help teams understand customer needs and objectives on a deeper level. Using these tools, organizations can recommend next best actions more effectively.
Today, teams are leveraging these insights to configure tailored collections strategies, communications triggers, and flexible payment arrangements through their collections solution.
AI-powered assistants provide real time support for those teams, too, helping them deliver clear and consistent guidance to every customer regardless of which channel they approach.
Data & Monitoring
Modern collections solutions provide access control measures for third parties who require access to data stored within the system. As a result, they help monitor access to customer accounts to ensure compliance.
Additionally, partnerships with tools like IE Hub help teams collect detailed financial assessment information so they can deepen their understanding of their customers’ financial well-being, empowering better, smarter decisions.
Future-Proof Features
Considering the Consumer Duty regulations, financial institutions should be prepared to face increasing regulatory scrutiny, evolving regulatory standards, and continuously innovating debt collection standards.
A highly configurable SaaS collections solution offers the flexibility and the scalability necessary to learn and grow in accordance with the latest regulations.
By implementing the right technology, organizations can set themselves up to attain stress-free compliance moving forward.
Embrace new opportunities with advanced technology
Today, countless organizations are working with C&R Software to adopt industry best practices. The Debt Manager collections platform is designed to help team implement a more customer-centric approach, with notable features including the Plan Offers functionality, which enables more flexible repayment options to support options and consistency across the customer base.
Combined with Debt Manager’s dynamic decisioning engine FitLogic, financial institutions are empowered to improve customer outcomes at every stage of the credit-risk lifecycle. Ultimately, embracing the principles of fairness, transparency and customer-centricity enhances organizational reputation and effectiveness in a continuously evolving regulatory landscape.
Don’t let the Consumer Duty turn into a burden to your organization. Contact us today to see how C&R Software can help transform it into an opportunity to optimize outcomes for you and your customers across the entire credit lifecycle.
