News Article

Debt Collection

OFWAT to remove FCA regulation requirement from its debt collection guidelines

By CreditMan Wednesday, August 26, 2015

Following recent calls for change from the Credit Services Association (CSA), OFWAT, the water industry regulator, has been working with specialist water debt collection agency and CSA member Orbit Collections Group to amend its current guidelines to protect consumers who may otherwise have been impacted by obliging water companies to only use agencies that were FCA regulated.

This is despite the fact that specialist collection agencies working in the misleadingly-titled ‘non-regulated’ sector do not fall within the FCA remit which is reserved for those involved in the collection of financial services debt (debt relating to the Consumer Credit Act).

And at the UK Credit and Collections Conference (UKCCC) organised by the CSA next month, Orbit will warn that others within the ‘non-regulated’ sector – including energy businesses, telcos etc – may find themselves in a similar position if they don’t address the current anomaly with their peers.

In the existing guidelines, OFWAT ‘expects’ its members to only engage with reputable agencies ‘…licensed by the FCA to engage in debt collection and who abide by industry codes of practice such as that of the CSA…’. This would currently preclude a water company from working with a ‘non-regulated’ specialist.

But Tom Somerville, Operations Director at Orbit, says it has shown that this would be to the consumers’ detriment:

“Specialists agencies working in the water industry do more than simply collect debt,” he says. “The water companies do not have the ultimate sanction of turning off the supply to those who cannot or will not pay, as do the banks with credit. Our role is therefore to work with consumers to resolve their debt issues, to explore what help is available through government or specific company schemes and find more affordable tariffs to reduce their ongoing charges.

“Within the existing guidance from OFWAT, this specialist help would have been lost, to the consumers’ detriment. Now, however, OFWAT is reviewing its guidance to ensure such specialisms are retained.”

A spokesman for OFWAT confirmed: “We have concluded that it would not be in the interest of customers to prevent debt collection agents who specialise in water debt from providing a service to the sector. In addition, we do not believe that there is a benefit in including this requirement in our guidance, as the FCA does not have any jurisdiction to consider malpractice associated with water debt collection.”

As such, the spokesman added, OFWAT is intending to update its guidelines: “We are confident that our update will ensure that those companies that specialise in unregulated debt can continue to serve the water sector. While we recognise that the FCA does not have role in regulating water debt, we do consider its handbook to be an example of best practice. As such, our updated guidance will encourage companies to contractually oblige their recovery agents to follow FCA guidelines when acting on their behalf.”

Leigh Berkley, CSA President commented: “We welcome this common sense approach by OFWAT, recognising the need for FCA standards of customer treatment, while understanding the important role which can be played by agencies who cannot be FCA regulated. The ultimate goal must remain that we treat every customer the same, whether dealing with a water, telco or banking debt, and we welcome OFWAT’s contribution in this regard.”

Tom will recount his experiences at the UKCCC at Wembley on September 10th.