Debt Collection Compliance Under CONC

Debt Collection Compliance Under CONC: Treating Customers Fairly

How a firm treats customers who fall behind is one of the most closely watched areas of consumer-credit conduct. The rules sit largely in CONC 7 of the FCA Handbook, which governs arrears, default and recovery, and they are reinforced by the Consumer Duty’s consumer-support outcome. This article sets out what CONC requires of firms collecting debt, and what a compliance function has to have in place to evidence fair treatment.

The governing principle: forbearance and due consideration

The organising idea of CONC’s arrears rules is that a customer in financial difficulty is to be treated with forbearance and due consideration, not pressed as if nothing had changed. In practice this means a firm must engage with a customer in difficulty to understand their circumstances, consider whether to accept reduced or suspended payments, and avoid action that would worsen the customer’s position without good reason. Firms are expected to have regard to the customer’s situation rather than applying a mechanical collections process regardless of hardship.

This does not mean a firm must forgive debts or abandon recovery. It means recovery must be conducted fairly, proportionately, and with genuine regard to a customer who is struggling — particularly one who is vulnerable.

Vulnerability sits at the centre

Customers in arrears are, by definition, more likely to be in vulnerable circumstances, and the FCA’s expectations on vulnerability apply with particular force in collections. A firm collecting debt must be able to identify signs of vulnerability, respond appropriately, and avoid compounding harm. The Consumer Duty’s consumer-support outcome reinforces this: support must be as accessible in difficulty as it was at the point of sale, and firms cannot make it hard for a struggling customer to get help. A collections operation that is efficient at pursuing payment but poor at recognising and responding to vulnerability is not compliant, however good its recovery rates.

What CONC restricts

CONC contains specific restrictions on collections conduct that a compliance function must operationalise. Firms must not pursue customers in a way that amounts to harassment or undue pressure. Communications must be clear, not misleading, and not designed to alarm. Charges applied to accounts in default must be fair and not used to profit from a customer’s difficulty. And where a debt is passed to a third-party collector or sold, the firm retains responsibility for ensuring the customer continues to be treated fairly — outsourcing collection does not outsource the conduct obligation.

Third-party collectors and the responsibility that does not transfer

This last point deserves emphasis, because it is a common source of exposure. When a firm engages a debt-collection agency or sells a portfolio, it does not shed its regulatory responsibility for how customers are treated. The firm must satisfy itself that any third party acting on its behalf, or any purchaser of its debt where relevant, meets the same standards of fair treatment the firm itself is held to. For a compliance function, that means due diligence on collectors, contractual standards, and ongoing oversight — the same operational-resilience and outsourcing discipline that applies elsewhere, brought to bear on collections.

What compliance has to evidence

As across CONC and the Consumer Duty, the burden is on the firm to demonstrate fair treatment, not merely to assert it. A collections compliance function should be able to evidence that customers in difficulty were engaged with and offered appropriate forbearance; that vulnerability was identified and responded to; that communications and charges met the standards; and that third-party collectors were overseen. This requires monitoring, quality assurance on collections interactions, and management information that shows outcomes for customers in arrears — not just recovery performance.

Information, engagement and the arrears process

CONC sets specific expectations around the arrears process itself. When a customer falls into arrears or default, firms are expected to provide clear information about the position, the sums owed and the options available, and to give the customer a genuine opportunity to engage before escalating. Firms should signpost sources of free, independent debt advice, and should allow a customer who is engaging in good faith reasonable time and space rather than escalating mechanically. The tone and content of arrears communications matter: they must inform and support, not pressure or alarm.

A collections operation that moves a customer through a rigid escalation sequence regardless of engagement or circumstance is precisely what the forbearance principle is designed to prevent. The process must be able to flex for the individual.

The management information a collections function needs

Evidencing fair treatment in collections requires the right management information, and it looks different from pure recovery reporting. A compliance function should be able to see and evidence the proportion of customers in difficulty who were offered forbearance and what kind; how vulnerable customers were identified and what happened to them; complaint volumes and themes arising from collections; the performance and conduct of any third-party collectors; and outcome patterns that might reveal unfair treatment of particular groups. Recovery rate alone tells the board nothing about whether customers were treated fairly — and under the Consumer Duty, fair treatment is the thing that has to be evidenced.

The wider consequences of getting collections wrong

Collections is an area where compliance failings translate quickly into redress and regulatory action. Unfair treatment of customers in arrears — excessive pressure, poor handling of vulnerability, unfair charges, or unmonitored third-party collectors — generates complaints, and complaints in this area frequently reach the Financial Ombudsman Service, whose decisions can require redress across affected customers. Systemic failings can lead to FCA intervention, past-business reviews and remediation programmes that dwarf any short-term recovery gains. The commercial logic is clear once the full cost is counted: fair, compliant collections is cheaper than the alternative.

This is also an area of persistent regulatory focus. The treatment of borrowers in financial difficulty has been a recurring supervisory priority, and the cost-of-living pressures of recent years have kept it there. A firm’s collections conduct is one of the things the regulator is most likely to examine, which raises the premium on getting it right and being able to evidence it.

Building a compliant collections capability

Bringing this together, a compliant collections operation rests on a few foundations: a genuine forbearance framework that flexes to the individual; robust vulnerability identification and response; clear, fair communications and charges; disciplined oversight of any third-party collectors; and management information that evidences fair outcomes, not just recovery. Building and sustaining that is senior compliance work, and it sits at the point where the firm’s conduct obligations are most visible and most tested.

Why this needs senior compliance ownership

Collections is an area where commercial pressure and conduct obligation pull hardest against each other, and where the regulator’s attention is most consistent. It needs a compliance leader who can hold the fair-treatment line against recovery targets, build the monitoring that evidences it, and oversee the third parties involved. This is senior, judgement-intensive compliance work, and getting it wrong — through unfair pressure, poor vulnerability handling, or unmonitored collectors — is a direct route to redress and enforcement.

FD Capital recruits the compliance leaders who own arrears and collections conduct — heads of compliance and MLROs who can build fair-treatment frameworks that satisfy the regulator and withstand scrutiny.

Call 020 3287 9501 or email recruitment@fdcapital.co.uk to discuss a compliance leadership appointment covering collections, arrears and conduct at a regulated lender.

FD Capital — Regulated-Firm Compliance Recruitment

Fellow of the ICAEW | Placing compliance leaders who own conduct, collections and fair-treatment frameworks, into regulated firms since 2018. We recruit permanent, interim and fractional finance leaders across the UK. 4,600+ network. 160+ placements. Shortlists in 3–7 working days.

This guide is general information for finance leaders and does not constitute legal, regulatory or professional advice. Businesses should take their own advice on their specific circumstances. Regulatory positions described are current as at mid-2026 and are developing; readers should check the FCA’s latest publications.