Collections is becoming one of the clearest indicators of Consumer Duty in practice.
Across the consumer credit sector, the Financial Conduct Authority is increasingly focused on what happens after the point of sale. While affordability and onboarding remain important, supervisory attention is shifting towards how firms manage customers in financial difficulty and how outcomes evolve over time.
For directors, compliance leaders and operational teams, this creates a new area of scrutiny. Collections is no longer just an operational function. It is a core conduct risk.
From process to outcomes
Most firms have established collections processes. Policies are in place, forbearance options are defined, and staff are trained to identify customers in difficulty.
What is changing is how those processes are assessed.
The FCA is looking beyond whether steps are followed and focusing on whether those steps lead to fair and sustainable outcomes. This includes examining how quickly firms identify financial difficulty, how consistently support is applied and whether customers are given realistic options based on their circumstances.
A process that exists on paper is not enough. Firms must be able to demonstrate that it works in practice.
Vulnerability in real terms
Vulnerability has become central to this assessment.
Firms are expected to move beyond broad definitions and show how vulnerable customers are identified and supported in real time. This includes recognising indicators such as financial stress, health issues or changes in personal circumstances, and adapting interactions accordingly.
In collections, this often means adjusting communication styles, offering tailored repayment options and avoiding actions that could worsen a customer’s situation.
The key challenge is consistency. If similar customers are treated differently, or if vulnerability is identified but not acted upon, the risk becomes visible very quickly.
Arrears as a leading indicator
Arrears data is now a key source of regulatory insight.
Patterns such as early-stage delinquency, repeat missed payments or customers moving quickly through collections processes can all indicate underlying issues. In some cases, this links back to affordability at origination. In others, it reflects how firms respond once customers begin to struggle.
Equally, data driven reviews of historic and legacy debt, late-stage arrears management and aged debtors/recoveries are critical to understanding how firms have managed their lending and collections practices.
The FCA is increasingly interested in how firms interpret this data. It is not just about reporting arrears levels but understanding what they mean and what actions follow.
Where trends are identified but not addressed, questions are likely to follow.
The link to complaints and redress
Collections practices are a common driver of complaints.
Customers who feel they have not been treated fairly, supported appropriately or given clear options are more likely to escalate concerns. In some cases, these complaints lead to findings that extend beyond collections into affordability or product suitability.
This creates a direct link between collections and redress risk. Decisions made at this stage can have long-term financial and regulatory implications.
Firms that approach collections purely as a recovery function risk missing this broader context.
Why firms should act now
For many firms, collections frameworks have evolved over time. Systems have been updated, processes refined and teams expanded.
However, those changes are not always reflected in a clear, consistent approach that can be evidenced under scrutiny.
A proactive review can highlight where processes are working well and where outcomes could be improved. This includes examining how vulnerability is handled, how decisions are recorded and how data is used to inform strategy.
The key question is simple. If challenged, could you demonstrate that your collections approach delivers fair outcomes for all customers?
How ALPH Legal & Compliance Can Support
ALPH Legal & Compliance supports consumer credit firms in reviewing and strengthening collections and vulnerability frameworks.
We work with firms to assess how collections processes operate in practice, test consistency of treatment and ensure alignment with Consumer Duty expectations. This includes operational reviews, vulnerability assessments and analysis of arrears and complaints trends.
As regulatory focus continues to shift towards customer outcomes, firms that can evidence fair and proportionate collections practices will be far better positioned to manage both risk and scrutiny. To discuss how ALPH can support your firm, get in touch.