In September, Arum blogged about the usage of internal DCA/Legal brands by Collections & Recoveries functions, which was receiving regulatory scrutiny by the FCA.
Although the focus at that time was mainly on banks and payday lenders, we expected Ofwat would follow suit of the FCA. In a previous blog, we issued our call to action for water companies to be proactive and review their practices and strategy in this area.
Fast forward to today and the regulatory and media spotlight is indeed now shining on water companies.
Although the FCA did not outright stipulate that the use of an internal DCA/Legal brand should cease, they do have concerns over whether the practice is transparent enough. The customer should be clearly signposted to the fact that this is part of the company where the debt is outstanding and not from an external DCA or legal firm.
Ofwat has said the same principles should apply to water companies and that customers must not be misled or scared into making payments.
Following the earlier focus by the FCA, many banks and payday lenders have ceased the practice or are in the process of stopping.
Of course it’s not always as clean cut as the regulators or media would like to suggest. For water companies these internal DCA/Legal letters are sent as a last resort after various touch point attempts with customers.
The water industry has the same obligation to treat customers fairly but has the extra consideration of ensuring that bills that can be paid are paid. If not the repercussion is that bills have to rise in the future for all customers. Therefore a balance must be struck.
In response water companies have made changes to their letters to clearly indicate that the branded DCA/legal named company is an internal part of the company, and this in turn is likely to blunt the effectiveness of this method, as is customer interaction in social networks and consumer forums. We would recommend if possible that companies consider changing the branding back to the core company branding or stop the strategy and outsource direct to an external DCA, as the most prudent approach.
What this does highlight is that the regulatory and media spotlight will continue to shine. It is better to be proactive rather than reactive in ensuring that evolutionally operational changes are made to address the shifting regulatory environment.
This is not the first time utilities have referred to, or adopted, FCA guidelines, especially in relation to Treating Customers Fairly, and we don’t expect that it will be the last.