Debt Collection agencies are set to face tougher, more intrusive and expensive regulation under plans being drawn up in Whitehall.
The 500 or so firms that either chase debt on behalf of lenders or buy distressed debt seem certain to come under the remit of the new Financial Conduct Authority, currently being carved out of the existing regulatory system.
Rogue operators are expected to drop out of the industry before they face disciplinary action, but responsible firms will be pleased at the prospect of a new professional respectability.
Their trade body, the Credit Services Association, has been lobbying to come under the FCA rather than the Ministry of Justice, which regulates claims management firms.
‘We need to be in the same room as the lenders,’ said a source. ‘They are the people we work for.’
The FCA will regulate both retail and wholesale markets, and will work alongside the new Prudential Regulation Authority, a part of the Bank of England that will oversee banks and insurers.
Until now, debt collectors have needed a licence from the Office of Fair Trading, which is merging with the Competition Commission. Consultation on regulating them is expected in February. The FCA is the preferred supervisor.
Meanwhile, the Registry Trust, the body maintaining the register of county court debt judgments, has found ‘a distinct change in behaviour’ on the part of creditors in the ten years from 2001 to 2011.
‘In the initial period, judgments were focused to the more affluent sector of the population,’ according to the trust’s latest annual review.
‘This may demonstrate that, during the period, creditors focused on the potential for households to pay. It is also likely that in the early part of the period financial services were not as freely available to people in less affluent neighbourhoods.’
Changes since then, said the trust, mean ‘the proportion of judgments experienced by less affluent households has steadily increased’.