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Are debt collection agencies regulated?

Are you concerned that instructing a debt collection agency could have a negative impact on your reputation and customer relationships? For peace of mind, it’s wise to choose a company that’s FCA regulated.

If you’ve been struggling to recover an overdue debt, you may feel the time has come to get expert help from a professional debt collection agency (DCA). However, it’s natural to have concerns about protecting your reputation.

Obviously, you need to choose a debt collection agency that has a good track record. But you also need to be confident that their effectiveness won’t be at the cost of your reputation or have an impact on long-established customer relationships that may be vital to the success of your business. That’s why it’s important to ensure that the company you choose will act with professionalism, integrity and full legal compliance.

Sadly, some unscrupulous debt collectors are prepared to use aggressive or intimidating tactics to persuade debtors to pay up. Remember, a DCA will be seen as your representative, so a heavy-handed approach could reflect badly on the way your business is perceived, not just by the debtors themselves, but potentially by other customers and commercial contacts.

What accreditations should you look out for?
First and foremost, you should check if the DCA is authorised and regulated by the Financial Conduct Authority (FCA). If so, they will be obliged to conform to a set of rules and guidelines which ensures they act with professionalism, honesty and fairness.

It’s also worth finding out if they’re members of the Credit Services Association (CSA). CSA members follow a strict code of practice based on the highest industry standards. Under the CSA’s Collector Accreditation Initiative, collection agents are tested annually to ensure their knowledge and skills are up to date.

Finally, don’t forget the issue of data protection. Is the DCA fully compliant with the latest GDPR legislation and registered as a data handler with the Information Commissioner’s Office (ICO)? If not, you could be at risk of compromising your own data protection policy.

Do all DCAs need to be FCA regulated?
Unfortunately, the simple answer is ‘no’. Anybody can set up a debt collection agency and begin trading right away. However, it’s different if the DCA wants to deal with debts which relate to financial services, such as loans, insurance policies and credit cards. In that case they must be FCA regulated. The FCA can take action against unregulated debt collectors who are unlawfully chasing financial services debts.

Why choose an FCA-regulated debt collection agency?
Choosing an FCA-regulated DCA means you can be sure they’ll operate with probity and with due consideration for the value of your reputation. Here are the key benefits:

  • An FCA-regulated DCA will have a compliance monitoring framework in place, with regular policy reviews.
  • If you’re not satisfied with the service you receive from the DCA, you can complain to the Financial Ombudsman Service.
  • The DCA should operate with financial integrity. Funds payable to you are often held in a ringfenced bank account and you should receive timely remittance.
  • All phone calls between the DCA and the debtor should be recorded for quality assurance and compliance purposes.

The DCA can provide you with authoritative advice and quality guidance on options for escalating debt recovery, for example taking legal action against the debtor.

Will an FCA-regulated debt collection agency be less effective?
There’s absolutely no reason to think that FCA regulation impacts on the agency’s ability to get results. The rules and code of conduct are not there to hamper their efforts in any way. They’re all about striking a sensible balance, helping businesses recover the monies that they’re rightfully owed while clamping down on unethical practices and protecting debtors’ rights.

Trust us with your debt and your reputation
At Redwood Collections, we take a proactive approach to debt collection that’s firm but fair. We’re proud to be FCA regulated and a member of the CSA, ensuring that we balance being results focused with a commitment to best practice and the highest standards of professionalism. Choose Redwood with confidence to help your business Grow Stronger.

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