Comply with debt collection rules

Debt collection is one of the FCA's highest-priority areas for consumer credit supervision. How you treat customers who fall behind on payments directly affects whether you meet both your legal obligations and the FCA's expectations under the Consumer Duty. Getting debt collection wrong exposes your firm to enforcement action, redress requirements, and significant reputational damage.

These rules apply whether you are collecting your own debts as the original creditor or operating as a third-party debt collection firm. Both activities require FCA authorisation, and both are subject to CONC 7 (the FCA's rules on arrears, default, and recovery).

When these rules apply

FCA debt collection rules apply whenever you take steps to recover money owed under a regulated consumer credit agreement. This includes:

Contacting a customer about missed or late payments
Issuing arrears notices or default notices
Negotiating repayment arrangements
Instructing field agents or doorstep collectors
Passing debts to third-party collection agents
Selling debt portfolios
Taking court action to enforce the debt

FCA debt collection rules (CONC 7)

FCA Consumer Credit sourcebook chapter 7 requirements for firms collecting debts owed under consumer credit agreements, including forbearance and vulnerable customer obligations.

Firms collecting debts under regulated consumer credit agreements must comply with CONC 7, which sets out detailed requirements for fair treatment of customers in arrears or financial difficulty. These rules apply to lenders collecting their own debts as well as third-party debt collectors and debt purchasers.

The overarching principle is that firms must treat customers in default or arrears with forbearance and due consideration. Firms must not pursue unreasonable collection strategies or apply disproportionate pressure.

Forbearance requirement: Firms must treat customers in financial difficulty with forbearance and due consideration (CONC 7.3.4R)
Reasonable repayment offers: Firms must consider freezing interest and charges where a customer is in financial difficulty and has made a reasonable offer to repay
Communication limits: Must not contact customers at unreasonable times or with unreasonable frequency; must not pursue third parties for payment unless legally entitled
Harassment prohibition: Must not use harassment, oppression, or conduct likely to cause alarm, distress, or humiliation (CONC 7.9)
Misleading statements: Must not falsely imply that non-payment will result in criminal prosecution where this is not the case
Arrears charges: Charges for arrears must be no more than necessary to cover the reasonable costs of the firm (CONC 7.7.5R)
Vulnerable customers: Must exercise particular care with customers who are vulnerable, including those with mental health conditions, serious illness, or recent bereavement (CONC 7.2.1R)
Debt management plans: Where a customer engages with free debt advice and proposes a reasonable repayment plan, the firm should accept it
Continuous payment authority: Must not request more than 2 unsuccessful attempts to collect payment using a CPA (CONC 7.6.12R for HCSTC, CONC 7.6.13R for others)

FCA CONC 7 - Arrears, default and recovery (including forbearance)

Collect debts compliantly step by step

Default notice requirements under CCA 1974

Statutory requirements for serving default notices under sections 87-89 of the Consumer Credit Act 1974, including prescribed form, content, and minimum cure period.

Before a creditor can enforce a regulated consumer credit agreement, terminate it, demand early repayment, recover possession of goods or land, or treat any right of the debtor as terminated or restricted, the creditor must first serve a valid default notice under section 87 of the Consumer Credit Act 1974. Failure to serve a valid default notice means the creditor cannot enforce the agreement.

The default notice must be in the prescribed form set out in the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 (SI 1983/1561, as amended). It must specify the nature of the alleged breach, the action required to remedy it (if capable of remedy), and the consequences of non-compliance.

Minimum cure period: 14 days from the date of service of the default notice (s.88(2) CCA 1974)
When required (s.87(1)): Before the creditor can enforce the agreement, terminate it, demand early payment of any sum, recover possession of goods or land, or treat any right of the debtor as terminated or restricted
Prescribed content: Must state the nature of the breach, what action (if any) is required to remedy it, and the date by which it must be remedied
Consequences of defective notice: If the notice does not comply with section 88, the creditor has no right to enforce, terminate, or take possession
Non-remediable breach: If the breach cannot be remedied, the notice must state the sum (if any) required to be paid as compensation and the date by which it must be paid
Compliance by debtor: If the debtor takes the required action before the date specified, the breach is treated as not having occurred (s.89)
Section 88 form requirements: Must use prescribed form under SI 1983/1561 (as amended by SI 2004/3236 and SI 2007/1167)

Consumer Credit Act 1974 - Part VII (Default and termination)

Court enforcement of improperly executed credit agreements

Restrictions on enforcement of consumer credit agreements that were not properly executed, including the court's powers under sections 127-130 of the Consumer Credit Act 1974 as amended by the Consumer Credit Act 2006.

Where a regulated consumer credit agreement has not been properly executed (for example, missing prescribed terms or failure to provide a copy to the debtor), the creditor can only enforce it with a court order. Sections 127 to 130 of the Consumer Credit Act 1974 govern the court's powers in these circumstances.

The Consumer Credit Act 2006 significantly reformed these provisions. Previously, section 127(3) made certain agreements irredeemably unenforceable if they lacked prescribed terms. The 2006 Act repealed section 127(3) for agreements made on or after 6 April 2007, giving courts wider discretion to make enforcement orders even for seriously defective agreements.

Court enforcement order (s.127(1)): Court may make an enforcement order if it considers it just to do so, having regard to the prejudice caused by the defect and the degree of culpability of the creditor
Irredeemable unenforceability (pre-2007): Agreements made before 6 April 2007 that lack prescribed terms remain irredeemably unenforceable under old section 127(3)
Post-2007 agreements: Section 127(3) repealed by CCA 2006 for agreements made on or after 6 April 2007; court has discretion to enforce even seriously defective agreements
Time orders (s.129): Court can reschedule payment of any sum owed under a regulated agreement if it appears just to do so, giving the debtor more time to pay
Return orders (s.133): For hire purchase and conditional sale, court may order return of goods to the creditor
Transfer orders (s.133): For hire purchase and conditional sale, court may transfer the creditor's title to certain goods to the debtor
Unfair relationships (s.140A-140C): Court can reopen a credit agreement if the relationship between creditor and debtor is unfair, introduced by CCA 2006 replacing old extortionate credit provisions

Consumer Credit Act 1974 - Part IX (Judicial control)

Enforcement restrictions you must understand

The CCA places significant restrictions on when and how you can enforce a consumer credit agreement. Ignoring these restrictions can result in the court refusing to allow enforcement, leaving you unable to recover the debt through legal means.

Improperly executed agreements

If the original credit agreement was not properly executed (for example, missing prescribed terms, no signature, or failure to provide copies), you cannot enforce it without a court order under section 127. The court has discretion to refuse enforcement entirely if the defect is sufficiently serious. For agreements made before 6 April 2007 where certain prescribed terms are missing, enforcement is impossible even with a court order (the 'irredeemable unenforceability' provisions, though these were narrowed by the Consumer Credit Act 2006).

No valid default notice

Enforcement action taken without a valid default notice is procedurally defective. This includes court proceedings, termination of the agreement, and demand for early repayment. Always verify that a compliant default notice was served and the 14-day cure period expired before proceeding.

Unfair relationships

Under sections 140A to 140C of the CCA (as inserted by the Consumer Credit Act 2006), a court can reopen a credit agreement if it determines the relationship between the creditor and the debtor is unfair. The court can set aside or vary the agreement, require the creditor to repay sums, or reduce the amount owed. The unfair relationships test has no financial threshold and can be raised as a defence in enforcement proceedings. The burden of proof is on the creditor to show the relationship is fair.

Common debt collection failures

Pursuing payment without forbearance: Continuing to demand full payment when the customer has clearly indicated financial difficulty
Defective default notices: Issuing notices that do not comply with the prescribed form or do not give the full 14-day cure period
Excessive contact: Contacting customers multiple times per day or at unreasonable hours
Failing to identify vulnerability: Not recognising or responding to signs that a customer is vulnerable
Collecting on unenforceable debts: Pursuing debts under improperly executed agreements without obtaining a court enforcement order
Not providing agreement copies: Failing to supply copies requested under sections 77 to 79, which makes the debt temporarily unenforceable
Inadequate debt advice signposting: Not actively directing customers in difficulty to free advice services

What to do next

Review your debt collection policies and procedures against the CONC 7 requirements. Ensure all staff involved in debt collection are trained on forbearance obligations, communication standards, and vulnerable customer identification. Audit your default notice templates and processes. If you use third-party debt collection agents, ensure your contracts require compliance with these standards and that you monitor their conduct.

For pre-contract and agreement execution requirements, see Meet pre-contract disclosure requirements
For Section 75 connected lender liability, see Section 75 claims and connected lender liability
For the broader regulatory framework, see Understanding UK consumer credit regulation

Official guidance on debt collection

Authoritative sources for debt collection compliance.

CONC 7: Arrears, default and recovery
FCA rules on debt collection, forbearance, and default handling.
FCA Handbook
Consumer Credit Act 1974 - sections 87 to 89
Default notice requirements and enforcement provisions.
legislation.gov.uk
FCA guidance on the fair treatment of vulnerable customers
FCA expectations for identifying and supporting vulnerable customers.
Financial Conduct Authority
Consumer Credit Act 1974 - sections 127 to 130
Enforcement restrictions for improperly executed agreements.
legislation.gov.uk
StepChange Debt Charity
Free debt advice service to signpost to customers in difficulty.
StepChange

Business Context Testing

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Comply with debt collection rules

When these rules apply

Collect debts compliantly step by step

Enforcement restrictions you must understand

Improperly executed agreements

No valid default notice

Unfair relationships

Common debt collection failures

What to do next

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🧪 Business Context Testing

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When these rules apply

Collect debts compliantly step by step

Enforcement restrictions you must understand

Improperly executed agreements

No valid default notice

Unfair relationships

Common debt collection failures

What to do next

Related guides in Financial Regulation Overview

Business Context Testing

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