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From today's Times.
https://www.thetimes.co.uk/edition/b...ases-lnwbwsfd6
https://www.thetimes.co.uk/edition/b...ases-lnwbwsfd6
Debt firms must explain court cases
Debt collectors have been told by their trade association that the Financial Conduct Authority wants more information on how they use litigation to pursue consumers in arrears.
The Credit Services Association sent an email to its members last week saying that they should expect a request on a number of matters, such as use of legal action.
At the CSA conference Philip Salter, the FCA’s director of retail lending, outlined what debt collectors, many of which are FCA-authorised, should expect as part of its “business as usual supervisory approach”.
He said that the FCA was also interested in monitoring complaints handling, remuneration, staff incentives as well as the quality of data transfer between firms and creditors.
Mr Salter also reminded debt collectors who buy bad consumer debt portfolios from banks at a discount and then attempt to collect the outstanding payments that they should take litigation action only when it was “appropriate to do so”. He said that they should also ensure that they had appropriate processes in place to return money to customers who had overpaid.
Litigation can be abused, as when Wonga, the payday loans company, used fake lawyers’ letters in 2013 to put pressure borrowers to make repayments. That led to a regulatory crackdown on the firm.
There is evidence of debt collectors’ increasingly using litigation. Arrow Global, the listed debt collector, disclosed last week when it reported its third-quarter earnings that it had spent £16 million in nine months on “legal cost investment”.
Many debt collectors such as Lowell and Cabot Credit Management, which pulled its initial public offering last week, have been developing their own in-house legal services. In a prospectus for a 2016 Cabot debt sale, it said that in the 20 years to 2014 it had obtained about 200,000 judgments. By the end of June last year the figure had risen to more than half a million. The rise was mostly driven by Cabot’s purchase of Marlin, a specialist law firm.
One source said that most debt collectors had strict guidelines for ensuring the appropriate use of litigation but said: “The key thing here is you have to be able to show that if you did take legal action it was the last course of action after all other avenues were exhausted.”
Peter Wallwork, chief executive of the CSA, said that the CSA “was recently praised for continuing to improve standards”, and added: “All members abide by the CSA’s code of practice and, where appropriate, are fully FCA authorised demonstrating that they have the appropriate business practices in place and put treating customers fairly at the heart of their service.”
Debt collectors have been told by their trade association that the Financial Conduct Authority wants more information on how they use litigation to pursue consumers in arrears.
The Credit Services Association sent an email to its members last week saying that they should expect a request on a number of matters, such as use of legal action.
At the CSA conference Philip Salter, the FCA’s director of retail lending, outlined what debt collectors, many of which are FCA-authorised, should expect as part of its “business as usual supervisory approach”.
He said that the FCA was also interested in monitoring complaints handling, remuneration, staff incentives as well as the quality of data transfer between firms and creditors.
Mr Salter also reminded debt collectors who buy bad consumer debt portfolios from banks at a discount and then attempt to collect the outstanding payments that they should take litigation action only when it was “appropriate to do so”. He said that they should also ensure that they had appropriate processes in place to return money to customers who had overpaid.
Litigation can be abused, as when Wonga, the payday loans company, used fake lawyers’ letters in 2013 to put pressure borrowers to make repayments. That led to a regulatory crackdown on the firm.
There is evidence of debt collectors’ increasingly using litigation. Arrow Global, the listed debt collector, disclosed last week when it reported its third-quarter earnings that it had spent £16 million in nine months on “legal cost investment”.
Many debt collectors such as Lowell and Cabot Credit Management, which pulled its initial public offering last week, have been developing their own in-house legal services. In a prospectus for a 2016 Cabot debt sale, it said that in the 20 years to 2014 it had obtained about 200,000 judgments. By the end of June last year the figure had risen to more than half a million. The rise was mostly driven by Cabot’s purchase of Marlin, a specialist law firm.
One source said that most debt collectors had strict guidelines for ensuring the appropriate use of litigation but said: “The key thing here is you have to be able to show that if you did take legal action it was the last course of action after all other avenues were exhausted.”
Peter Wallwork, chief executive of the CSA, said that the CSA “was recently praised for continuing to improve standards”, and added: “All members abide by the CSA’s code of practice and, where appropriate, are fully FCA authorised demonstrating that they have the appropriate business practices in place and put treating customers fairly at the heart of their service.”
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