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Debt recovery agency 1st Credit loses clients after OFT rebuke - Times Online
April 11, 2009
Debt recovery agency 1st Credit loses clients after OFT rebuke
David Budworth
HBOS and Citi Financial, part of Citigroup, have dropped 1st Credit, the debt recovery company that was reprimanded by the Office of Fair Trading (OFT), after criticism over its approach to debt collecting.
The OFT said its investigation revealed the company had failed to meet “satisfactory standards” and 1st Credit was ordered to stop using unfounded threats of bankruptcy to recover money. It must report to the OFT every six months, giving details of the number of enforcement actions it has taken against debtors. If it fails to comply, it could be fined up to £50,000 and have its consumer credit licence revoked.
1st Credit buys or manages uncollected debts from banks, credit card providers, utilities, telecoms operators and retailers. It services 3.2 million debts with a face value of £4 billion, making it one of Britain's biggest debt collection agencies. Bridgepoint, the private equity group bought 1st Credit four years ago for £72 million.
A spokesman for 1st Credit said: “We do not comment on what we do with any one business. We have, since late 2008, made improvements in our training and processes in all of the areas highlighted, and suggested proposals in response to the OFT requirements, which were accepted by them. We continue to seek to improve our processes and welcome the recognition by the OFT of the constructive approach that we have taken in response to the matters raised.”
HBOS, now part of the Lloyds Banking Group which is 43 per cent owned by the taxpayer, said that it had stopped selling on its debts to 1st Credit at the end of last year. Lloyds said that it continued to use 1st Credit but kept its relationships under constant review.
As Britain's biggest mortgage provider, HBOS would have been expected to be a lucrative source of business for 1st Credit as recession-hit households fell behind with their debt payments. Mortgages with payments that were more than three months late had increased by 40 per cent over the past year and the lender was expecting a significant rise in impairment charges during this year.
Citi Financial, the retail loan and credit card business of Citigroup, ended its two-year relationship with 1st Credit in January. The group, which bought the Egg, the internet bank in 2007, has a 6 per cent share of the UK credit card market.
Both relationships were severed after a period in which 1st Credit had come under fire for using intimidating tactics to chase customers. Citizens Advice, the Consumer Credit Counselling Service and Consumer Direct had all reported an increase in complaints about the company.
These complaints were reviewed as part of an OFT investigation that led to an official sanction in February. The loss of two significant clients will be a blow to a business that has been thriving in a worsening economy.
April 11, 2009
Debt recovery agency 1st Credit loses clients after OFT rebuke
David Budworth
HBOS and Citi Financial, part of Citigroup, have dropped 1st Credit, the debt recovery company that was reprimanded by the Office of Fair Trading (OFT), after criticism over its approach to debt collecting.
The OFT said its investigation revealed the company had failed to meet “satisfactory standards” and 1st Credit was ordered to stop using unfounded threats of bankruptcy to recover money. It must report to the OFT every six months, giving details of the number of enforcement actions it has taken against debtors. If it fails to comply, it could be fined up to £50,000 and have its consumer credit licence revoked.
1st Credit buys or manages uncollected debts from banks, credit card providers, utilities, telecoms operators and retailers. It services 3.2 million debts with a face value of £4 billion, making it one of Britain's biggest debt collection agencies. Bridgepoint, the private equity group bought 1st Credit four years ago for £72 million.
A spokesman for 1st Credit said: “We do not comment on what we do with any one business. We have, since late 2008, made improvements in our training and processes in all of the areas highlighted, and suggested proposals in response to the OFT requirements, which were accepted by them. We continue to seek to improve our processes and welcome the recognition by the OFT of the constructive approach that we have taken in response to the matters raised.”
HBOS, now part of the Lloyds Banking Group which is 43 per cent owned by the taxpayer, said that it had stopped selling on its debts to 1st Credit at the end of last year. Lloyds said that it continued to use 1st Credit but kept its relationships under constant review.
As Britain's biggest mortgage provider, HBOS would have been expected to be a lucrative source of business for 1st Credit as recession-hit households fell behind with their debt payments. Mortgages with payments that were more than three months late had increased by 40 per cent over the past year and the lender was expecting a significant rise in impairment charges during this year.
Citi Financial, the retail loan and credit card business of Citigroup, ended its two-year relationship with 1st Credit in January. The group, which bought the Egg, the internet bank in 2007, has a 6 per cent share of the UK credit card market.
Both relationships were severed after a period in which 1st Credit had come under fire for using intimidating tactics to chase customers. Citizens Advice, the Consumer Credit Counselling Service and Consumer Direct had all reported an increase in complaints about the company.
These complaints were reviewed as part of an OFT investigation that led to an official sanction in February. The loss of two significant clients will be a blow to a business that has been thriving in a worsening economy.
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