As of 31 July 2024, the Financial Conduct Authority’s (FCA) long-anticipated Consumer Duty officially came into force, representing one of the most transformative changes to financial services regulation in over a decade. In 2025, Direct Debit scheme participants—ranging from banks and billing service providers to charities and software vendors—are now reckoning with the full scope of these new obligations.
This article examines how Consumer Duty impacts Direct Debit collections, and what practical steps organisations are taking to comply with the FCA’s heightened standards.
What Is the FCA’s Consumer Duty?
The Consumer Duty introduces a higher standard of care for all financial service firms that interact with retail customers. Its cornerstone principle is that firms must:
“Act to deliver good outcomes for retail customers.”
This involves four core outcomes:
- Products and Services – must be fit for purpose and meet customer needs
- Price and Value – must be reasonable and proportionate to the benefits
- Consumer Understanding – communications must be clear, not misleading
- Consumer Support – help must be accessible, prompt, and fair
Firms are also required to evidence that they are achieving these outcomes.
Why Direct Debit Is in the Spotlight
Although Direct Debit itself is a payments mechanism, its use is heavily regulated when bundled into financial or subscription products. Companies using Direct Debit must now ensure:
- The payment method is suitable for the customer’s circumstances
- Customers are not being financially harmed by inflexible billing cycles or rigid collection schedules
- Communications about Direct Debit mandates and payment plans are clear and understood
- Support channels are equipped to help vulnerable or financially stressed payers
This has particular implications for:
- Subscription-based services
- Utility companies
- Lenders and insurers
- Charities and donation platforms
- Bureaus managing collections for third parties
Real-World Examples of Duty in Action
Energy Providers Updating Pre-notification Notices
Several energy providers—including E.ON and Octopus—have revised their Direct Debit pre-notification emails to include:
- Clear monthly cost breakdowns
- Options for flexible payment dates
- Alerts for upcoming changes due to energy tariff reviews
Banks Enhancing Indemnity Claims Transparency
Some banks, like Lloyds and Barclays, have updated their Direct Debit Guarantee claims process, ensuring customers understand:
- What qualifies as an indemnity claim
- The timeframe for refunds
- Their rights and responsibilities
This shift is intended to reduce misuse and enhance understanding—core principles of the Duty.
Bureaus Auditing Client Value Proposition
Direct Debit bureaus offering collection services for gyms, charities, and SaaS providers are now:
- Requiring more robust customer onboarding disclosures
- Auditing the value proposition of their clients’ services
- Refusing to process for businesses that fail to align with fair value principles
What Firms Must Now Demonstrate
Under the Duty, simply offering Direct Debit is no longer enough. You must document and evidence:
- That Direct Debit is appropriate for the target market
- That any fees or penalties tied to failed payments are proportionate
- That customer support lines and online help offer accessible resolution paths
- That communications are tested for comprehension and clarity
The FCA now expects “reasonable foreseeability” of customer outcomes, meaning firms must design payment journeys that take into account:
- Irregular income patterns
- Financial hardship
- Vulnerability (e.g. disability, bereavement, digital exclusion)
Compliance Checklist for Direct Debit Stakeholders
| Area | Key Action Required |
| Pre-notification comms | Review for clarity, simplicity, and digital readability |
| Value assessment | Ensure payment structures deliver fair value |
| Vulnerability protocols | Embed support systems for vulnerable customers |
| Payment flexibility | Offer changeable dates or payment plans |
| Evidence gathering | Maintain documentation of compliance assessments |
The Role of Bureaus and FM Providers
Bureaus that manage Facilities Management (FM) Direct Debit arrangements—collecting on behalf of clients—must be especially vigilant. They are now indirectly accountable for:
- The fairness of their clients’ products
- The appropriateness of using Direct Debit as the sole method of payment
- Offering opt-out or hardship support when needed
This has led to an uptick in contract terminations by compliant bureaus unwilling to risk breaching FCA expectations by serving opaque or exploitative operators.
The Bigger Picture
Consumer Duty signals a new era for Direct Debit management—one where technical compliance alone is no longer sufficient. Now, every interaction around payment collection must be judged by its outcome for the customer, including how easily they can:
- Understand their payment obligations
- Access support during financial hardship
- Avoid unintentional debt or fees
Firms that rise to this challenge may gain more customer trust, better retention, and fewer disputes. Those that fall short could face FCA investigations, reputational damage, and customer attrition.
