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The Credit Services Association (CSA)
Blog: How can we improve fairness in government debt collection?
Claire Aynsley is Head of Regulatory and Compliance Standards at the Credit Services Association. Since joining the organisation over 10 years ago, her dedication and passion for the industry have greatly enhanced the status of the Association, forging strong relationships with regulatory bodies and other industry stakeholders to ensure we are at the forefront of any regulatory and legislative changes.
Last month, Citizens Advice published a report on fairness in government debt collection after it emerged that the number of related issues they were dealing with had doubled between 2005/6 and 2014/15. The report highlighted issues such as there being no consistent approach to assessing affordability and poor communication and practice that was leaving vulnerable customers in even worse financial difficulty. Now, money saving expert Martin Lewis and debt charity StepChange are calling on the government to give all people struggling with temporary debt ‘breathing space’ so that they can pay for essentials like food.
The collection of public sector debt is not regulated which ultimately means there are no rules or regulation to follow or adhere to. It’s clear therefore that debt collection practice in this sector is lagging behind the utilities and financial services sectors (which are both heavily regulated) but what can be done to improve things?
Adopt a debt collection industry-wide Code of Practice
We were disappointed that the report didn’t mention the Credit Services Association’s long-standing Code of Practice, especially since its recommendations included a publicly available best practice debt collection protocol. Whilst many of our Member companies have now been through authorisation by the Financial Conduct Authority (FCA), our Code of Practice is not just for authorised firms. It is designed as an industry-wide best practice model that, if taken up more widely, will ensure consistently high standards. This consistency is important for customers so that they know what their rights are and how they will be treated when faced with any kind of debt.
Our current Code of Practice is currently under review and being updated to broaden its scope from being just about collection practices to focusing more about general good business practice. This is all about trying to get businesses and organisations to take responsibility for themselves and self-regulate, rather than just relying on what they have to do to comply with regulation. It means that businesses and organisations will be forced to look at the way they deal with their customers and make sure that they are doing what is right and fair.
Big changes have taken place across the debt collection industry in recent years and we want to encourage continuous improvement to make sure that, whatever sector you are operating in, you are upholding the highest standards.
Assess affordability as standard
Properly assessing affordability is key to ensuring that all customers are treated fairly and that those in financial difficulty are not left in situations where they can’t afford basics like food. The government doesn’t and shouldn’t want people to suffer as a result of settling debts. We make reference to the Common Financial Statement in our Code of Practice which is a universal tool for assessing affordability. It is currently being rejuvenated to become the Standard Financial Statement, which will include new sections in relation to things like savings. Those working in government collections need to be encouraged to use this and boost it with their own additional assessments of affordability as many debt collection agencies do.
Make ‘breathing space’ a requirement
We welcome Martin Lewis/StepChange’s call to allow customers in financial difficulty ‘breathing space’. This is a requirement for all our Members within our Code of Practice and there is no reason it shouldn’t be happening across the board. Our Members who work with government must provide breathing space to customers even if government clients tell them not to and we are working with the likes of HMRC to demonstrate the business case for this.
We would always encourage breathing space where financial difficulty is apparent. For government agencies and authorities, there is no point in generating lots of disputes, which costs time and money when customers can be engaged with more effectively. Of course, it only makes business sense to do this in cases where there is genuine hardship and that’s why formally assessing affordability is so important.
We know that conversations are happening within government about making ‘breathing space’ mandatory and this is a great step forward.
Encourage greater take up of learning and development
Our industry leading learning and development programmes are open to all and have a significant impact on raising standards of debt collection practice. We’d like to see more government collections professionals taking up opportunities such as our annual Collector Accreditation Initiative (CAI), which tests those within the organisation responsible for debt collection to ensure they are up to date with the latest regulatory and general best practices. We also encourage attendance from this sector to our annual flagship conference – the UK Credit and Collections Conference (UKCCC) – where attendees hear from expert speakers on industry-related topics covering regulation and compliance and also offer the opportunity to network with industry stakeholders and peers.