Ofgem and Ofwat warn firms about ‘intimidating’ debt collection activity

Ofgem and Ofwat have issued warnings to their respective sectors about how they expect companies to treat struggling customers, after identifying several areas of concern.

A joint letter signed by both regulators, as well as the Financial Conduct Authority (FCA) and Ofcom, has been published via the UK Regulators’ Network (UKRN).

The letter, issued as part of Debt Awareness Week 2024, warns of the difficulties still being faced by consumers as a result of the cost of living crisis.

It identifies several areas that can cause consumer harm, including struggling customers feeling they are being inundated by collections communications, particularly from multiple sectors.

It also warns of the use of an “intimidating or threatening tone” in communications which it says can cause consumers to disengage with their creditors, reducing chances of repayment and the likelihood of seeking free debt advice.

Furthermore, it adds, advisers working for free debt advice organisations are facing “unnecessary barriers” when engaging with creditors on behalf of their clients. Debt advisers, it warns, are finding it hard to reach creditors.

“If they can’t, those creditors may not properly register the involvement of the adviser and continue to contact customers, undermining customer engagement with free debt advice and support services,” it said.

As such, the four regulators have outlined a number of expectations they expect of companies within their respective sectors.

These include:

• Firms ensure an appropriate frequency of collections communications and reduce the frequency where it is not delivering positive customer engagement or is causing harm to consumers
• Collections communications use tone that is supportive
• Information about free debt advice and how to access it is clear and prominent in collections communications and ‘warm’ referrals (where a firm refers the customer to another organisation directly so that the customer doesn’t have to make a second call) are used where appropriate
• Firms make it as easy as possible for advisers from free debt advice organisations to contact creditors and ensure customer service agents are empowered to resolve the issues advisers contact them about

The letter adds: “The expectations set out above are drawn from existing rules, guidance and best practice across our sectors. Firms should be prepared for regulators to use their respective powers to ensure these expectations are met and embedded in firms’ processes in their sectors.

“Where we find firms are falling short and delivering poor outcomes leading to consumer harm, we may take robust action. We want firms to commit to delivering these outcomes and will continue to monitor how firms in our sectors are supporting customers in financial difficulty in 2024.

“We will continue to work together as a group of regulators, and will keep under review whether further action is required to ensure firms use debt collection strategies that provide the right support, and minimise harm to their customers.”