This summary report, based on responses to a survey and insights from a webinar organised by Standing Committee 2 (SC2) of FinCoNet, provides an overview of the regulatory framework, major consumer protection challenges and effective approaches related to debt collection activities in SC2 jurisdictions.
The findings show that almost all responding jurisdictions have strengthened consumer protection relating to debt collection in recent years and put in place a framework to regulate debt collection activities. Statutory guidelines are adopted, with some supplemented by non-statutory guidance. These regulations apply broadly to banks, non-bank creditors and debt collection agencies, with some extending to payment service providers and credit servicers. The most commonly adopted supervisory tools to monitor debt collection activities are collection and analysis of complaints data, followed by off-site and on-site examinations, and thematic reviews. Fines are the most common enforcement actions against improper debt collection activities, while criminal prosecution for suspected offence committed and revocation of the license of debt collection agencies are adopted where appropriate.
The most common consumer protection issues related to debt collection activities identified by responding jurisdictions are abusive collection practices, limited consumer awareness, and lack of transparency. There are cases where consumers are unaware of their rights and have inadequate information to verify the debtor identity and debt amount, leaving them vulnerable to unfair treatment.
The survey identified certain examples of effective supervisory approaches towards promoting good practices in debt collection. These include taking swift enforcement actions against misconduct; introducing authorization processes for credit servicers; and conducting behavioural experiments to identify ways to help consumers better manage their debts.
Debt collection activities cut across financial and non-financial sectors while different authorities including law enforcement agencies are often involved. SC2 Members’ experience showed that a coordinated and comprehensive approach is crucial for supervising debt collection activities and educating consumers. Jurisdictions are encouraged to share best practices, leverage lessons learned and continue to strengthen their approaches to protect consumers and ensure responsible debt collection activities.
