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Creditors get heavy-handed over small debts
We explain your rights if you face harassment from collection agencies
High street banks, credit card companies and telecoms operators are increasingly selling on debts to collection agencies that use intimidating tactics to chase customers, even when the money owed is only a few hundred pounds.
The amount of debt passed on to such agencies has more than trebled in the past six years to £21 billion, according to the Credit Services Association, the industry's main trade body. More than 20 million cases are pursued each year - a figure that is expected to rise as recession-hit households struggle to pay their bills - and some agencies have been accused of being so aggressive in their pursuit of debts that the Government is threatening a crackdown.
Experts say that many agencies act much more forcefully than the original creditors, using almost any means necessary to scare people into paying. Ploys include phoning debtors repeatedly at home, contacting them at work to shame them in front of colleagues or threatening bankruptcy or repossession. Three out of four respondents to a survey by IVA.co.uk, the debt advice website, said that they had suffered stress, health problems or distress as a result of creditor harassment.
Steve Rees, of Vincent Bond, the debt advice company, says: “We have come across cases of collection agency staff being quite aggressive, perhaps because some are paid commission. Threats of court action or someone visiting a person's home can be very distressing and frightening.”
For some people the unwanted attention of debt collectors comes completely out of the blue. Some find themselves hounded for debts that are so small - such as a library fine - that they simply forgot about them. Others are chased for debts that do not belong to them, sometimes with tragic consequences, as in the case of Beryl Brazier, a great-grandmother who committed suicide in 2006 over mistaken debt demands.
A business mentor from Yorkshire feels that he was treated unfairly after getting into arrears on his American Express credit card. He says: “American Express itself has been very unhelpful. After sending threatening letters it called in the debt-collection agency Allied International Credit, which continued to plague me with threats of court and bankruptcy.
“It implied that I was dishonest about my inability to pay in full and even refused to take a regular ‘goodwill gesture' payment until I was back on my feet. It seems to want to frighten people and so you get to the point where you don't want to answer the phone or open your post.”
American Express said: “If a card member were to advise us of financial difficulties, we would work out a payment scheme agreed by both parties. We have high standards of customer service and use reputable agencies only.
“All collections agencies must meet all regulatory and industry standards and we closely monitor all outsourced activities.”
Allied International Credit disputed criticism of its methods, saying: “We treat all complaints and allegations seriously. We have a robust and proven complaint process and would like the opportunity to investigate the claim. Our policies and procedures, including our training programmes, ensure compliance with all legislation and the industry's code of conduct. Treating customers fairly and responsibly is critical to how we conduct our business every day.”
Once a debt is sold on by a business, the debt is no longer its responsibility. Many are so keen to pass on the problem that they sell on debts for a fraction of the value of the amount owed - 10p for every £1 outstanding is typical, say industry insiders.
Experts claim that the original creditors are well aware of the heavy-handed approach being employed. Nick Pearson, of Baines & Ernst, the debt adviser, says: “When banks or other creditors used to hold on to their debts they did not want to damage their reputations by being too aggressive. Selling on the debt is a way to wash their hands of the problem, but they know what tactics are used.”
With so many creditors passing the buck in this way, there have been calls for tighter regulation. Gareth Thomas, the Consumer Minister, has demanded a meeting with the Credit Services Association next week. The Office of Fair Trading (OFT) also plans to review its rules this year.
Meanwhile, if you are contacted by a debt-collection agency there are some simple rules to follow. The first is not to ignore the problem, because it will almost certainly make things worse. Ask the company for documentary proof to support its claims. It will also help if you have proof of your payments, such as bank statements.
You should also ensure that the agency investigating your claim does not breach OFT guidelines. It is not allowed to contact you at unreasonable times - some harass debtors by phoning early in the morning and late at night - or make misleading claims.
Rogue companies have been known to send letters that resemble court claims and threaten seizure of assets in an attempt to intimidate customers into handing over money. That is regarded as “unfair practice” under the OFT guidelines and you should report the company to your local trading standards office.
Beccy Boden-Wilks, of National Debtline, the charity, points out: “Collection agencies are not bailiffs; they have no right of entry into your home. If you are being pursued for a debt and the lender has instructed a bailiff through the county court, they are still unable to force entry into your home on their first visit.”
Agents are allowed to visit you at your property, but they must give you notice of the time and date, and they should not turn up at your place of work unless requested.
If you recruit an adviser, such as a Citizens Advice Bureau, to negotiate a settlement, the debt collectors are required by law to enter into talks with the adviser. If the company insists on dealing with you directly, it is in breach of OFT guidelines and risks losing its licence to operate.
An agency should also not insist that you pay your debt in full or demand “unreasonably large instalments” if you would struggle to make the payments.
Creditors typically sell on debts to collection agencies after three missed payments. According to the IVA.co.uk survey, many people feel that they are poorly dealt with even before this happens.
The credit card providers MBNA and Barclaycard are the two companies most often mentioned for aggressively pursuing debts. But the criticism is not confined to financial companies. HM Revenue & Customs also incurred the respondents' displeasure.
Of the 277 respondents, only 11 said that they had been offered face-to-face advice or debt counselling by creditors when they ran into arrears, even though many companies claim that they offer a sympathetic ear when people run into trouble. The survey also highlights a worrying new trend for loan and credit card companies to apply for charging orders. These are sought by lenders through the courts to secure debts such as personal loans and credit cards against the borrower's home. In the worst cases, this could result in repossession.
If you are unhappy with the way a financial company is treating you, take your complaint to the Financial Ombudsman Service (0845 0801800).
Tricks of the trade
Phoning debtors repeatedly throughout the day.
Calling at unreasonable times.
Contacting debtors at work, even when told not to.
Using documentation designed to look as if it has the weight of the courts behind it.
Refusing to talk to third parties, such as debt advice agencies, despite the debtor's request to do so.
Ignoring claims that debts have been settled or are disputed.
We explain your rights if you face harassment from collection agencies
High street banks, credit card companies and telecoms operators are increasingly selling on debts to collection agencies that use intimidating tactics to chase customers, even when the money owed is only a few hundred pounds.
The amount of debt passed on to such agencies has more than trebled in the past six years to £21 billion, according to the Credit Services Association, the industry's main trade body. More than 20 million cases are pursued each year - a figure that is expected to rise as recession-hit households struggle to pay their bills - and some agencies have been accused of being so aggressive in their pursuit of debts that the Government is threatening a crackdown.
Experts say that many agencies act much more forcefully than the original creditors, using almost any means necessary to scare people into paying. Ploys include phoning debtors repeatedly at home, contacting them at work to shame them in front of colleagues or threatening bankruptcy or repossession. Three out of four respondents to a survey by IVA.co.uk, the debt advice website, said that they had suffered stress, health problems or distress as a result of creditor harassment.
Steve Rees, of Vincent Bond, the debt advice company, says: “We have come across cases of collection agency staff being quite aggressive, perhaps because some are paid commission. Threats of court action or someone visiting a person's home can be very distressing and frightening.”
For some people the unwanted attention of debt collectors comes completely out of the blue. Some find themselves hounded for debts that are so small - such as a library fine - that they simply forgot about them. Others are chased for debts that do not belong to them, sometimes with tragic consequences, as in the case of Beryl Brazier, a great-grandmother who committed suicide in 2006 over mistaken debt demands.
A business mentor from Yorkshire feels that he was treated unfairly after getting into arrears on his American Express credit card. He says: “American Express itself has been very unhelpful. After sending threatening letters it called in the debt-collection agency Allied International Credit, which continued to plague me with threats of court and bankruptcy.
“It implied that I was dishonest about my inability to pay in full and even refused to take a regular ‘goodwill gesture' payment until I was back on my feet. It seems to want to frighten people and so you get to the point where you don't want to answer the phone or open your post.”
American Express said: “If a card member were to advise us of financial difficulties, we would work out a payment scheme agreed by both parties. We have high standards of customer service and use reputable agencies only.
“All collections agencies must meet all regulatory and industry standards and we closely monitor all outsourced activities.”
Allied International Credit disputed criticism of its methods, saying: “We treat all complaints and allegations seriously. We have a robust and proven complaint process and would like the opportunity to investigate the claim. Our policies and procedures, including our training programmes, ensure compliance with all legislation and the industry's code of conduct. Treating customers fairly and responsibly is critical to how we conduct our business every day.”
Once a debt is sold on by a business, the debt is no longer its responsibility. Many are so keen to pass on the problem that they sell on debts for a fraction of the value of the amount owed - 10p for every £1 outstanding is typical, say industry insiders.
Experts claim that the original creditors are well aware of the heavy-handed approach being employed. Nick Pearson, of Baines & Ernst, the debt adviser, says: “When banks or other creditors used to hold on to their debts they did not want to damage their reputations by being too aggressive. Selling on the debt is a way to wash their hands of the problem, but they know what tactics are used.”
With so many creditors passing the buck in this way, there have been calls for tighter regulation. Gareth Thomas, the Consumer Minister, has demanded a meeting with the Credit Services Association next week. The Office of Fair Trading (OFT) also plans to review its rules this year.
Meanwhile, if you are contacted by a debt-collection agency there are some simple rules to follow. The first is not to ignore the problem, because it will almost certainly make things worse. Ask the company for documentary proof to support its claims. It will also help if you have proof of your payments, such as bank statements.
You should also ensure that the agency investigating your claim does not breach OFT guidelines. It is not allowed to contact you at unreasonable times - some harass debtors by phoning early in the morning and late at night - or make misleading claims.
Rogue companies have been known to send letters that resemble court claims and threaten seizure of assets in an attempt to intimidate customers into handing over money. That is regarded as “unfair practice” under the OFT guidelines and you should report the company to your local trading standards office.
Beccy Boden-Wilks, of National Debtline, the charity, points out: “Collection agencies are not bailiffs; they have no right of entry into your home. If you are being pursued for a debt and the lender has instructed a bailiff through the county court, they are still unable to force entry into your home on their first visit.”
Agents are allowed to visit you at your property, but they must give you notice of the time and date, and they should not turn up at your place of work unless requested.
If you recruit an adviser, such as a Citizens Advice Bureau, to negotiate a settlement, the debt collectors are required by law to enter into talks with the adviser. If the company insists on dealing with you directly, it is in breach of OFT guidelines and risks losing its licence to operate.
An agency should also not insist that you pay your debt in full or demand “unreasonably large instalments” if you would struggle to make the payments.
Creditors typically sell on debts to collection agencies after three missed payments. According to the IVA.co.uk survey, many people feel that they are poorly dealt with even before this happens.
The credit card providers MBNA and Barclaycard are the two companies most often mentioned for aggressively pursuing debts. But the criticism is not confined to financial companies. HM Revenue & Customs also incurred the respondents' displeasure.
Of the 277 respondents, only 11 said that they had been offered face-to-face advice or debt counselling by creditors when they ran into arrears, even though many companies claim that they offer a sympathetic ear when people run into trouble. The survey also highlights a worrying new trend for loan and credit card companies to apply for charging orders. These are sought by lenders through the courts to secure debts such as personal loans and credit cards against the borrower's home. In the worst cases, this could result in repossession.
If you are unhappy with the way a financial company is treating you, take your complaint to the Financial Ombudsman Service (0845 0801800).
Tricks of the trade
Phoning debtors repeatedly throughout the day.
Calling at unreasonable times.
Contacting debtors at work, even when told not to.
Using documentation designed to look as if it has the weight of the courts behind it.
Refusing to talk to third parties, such as debt advice agencies, despite the debtor's request to do so.
Ignoring claims that debts have been settled or are disputed.
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