Can Calmony open a client account for a commercial debt collection agency?
Yes, where the agency collects business to business commercial debt only, and subject to approval by Griffin Bank. Consumer debt collection is not supported.
Policy and advisory
Scope
This policy covers agencies recovering unpaid commercial invoices owed by one business to another. It does not cover consumer debt, regulated credit agreements, or debt purchase.
Regulatory position
Commercial debt recovery is not a regulated activity in the UK. Debt collecting and debt administration are only regulated where the debt arises under a credit agreement, a consumer hire agreement or a peer to peer agreement. An unpaid trade invoice between two businesses is none of those, so no FCA authorisation is required and the agency has no AML supervisor.
Client money and the Calmony position
Because the activity is unregulated, statutory client money rules do not apply. The account is a client account created by contract between the agency and its clients, not by regulation.
Calmony's position is that we take a regulated approach regardless. Where an unregulated sector sets no standard, we apply our own.
In practice that means:
- Full company verification on every business whose recovered funds are collected into and held in the account.
- No payment out to an unverified payee, under any circumstances.
- Ongoing monitoring of the account for suspicious activity.
- OFSI checks on inbound payments.
The consumer perimeter
Sole traders and small partnerships can count as individuals for credit purposes. If an agency collects from them, or takes on any consumer debt, the activity can fall inside the FCA perimeter.
Agencies must confirm in writing that they collect from businesses only. This is demonstrated by providing Calmony with a copy of their terms and conditions where this is specifically stated.
Where the payments come from
Most agencies take debtor payments through an FCA authorised card payment institution. That provider performs merchant due diligence on the agency itself. It performs no checks on the debtors paying in, and none on the businesses the money is paid out to.
What Calmony verifies
Calmony verifies the companies receiving the recovered funds, being the agency's own clients. We do not verify the debtors paying in. This closes the outbound gap that no other party in the payment chain covers.
Internal procedures
- Confirm commercial only. Obtain a copy of the agency's standard terms and conditions. Review them and confirm they specifically state that the agency collects commercial business to business debt only and does not take consumer debt. Record at onboarding that the terms have been reviewed and meet this requirement. Also check the wording that creates the client account and defines when recovered funds become due to the client.
- Confirm the payment provider. Obtain the exact legal entity name and FCA firm reference number of the payment provider, and of the card payment provider if applicable. Verify each entity on the FCA register and record the result.
- Verify all payees. Every payee on the account must be verified through Calmony Verify before any payment out. There are no exceptions and no unverified payee types. In practice the payees will be the companies the agency is collecting debts for, plus usually one further payee being the agency's own trading account for transferring out its fees.
- Explain the value. Most debt collection agencies already need to verify their own clients. Calmony Verify is a customer due diligence verification carried out to our requirements, which the agency may choose to accept and build upon rather than duplicate.