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OFT warns credit firms against legal action outside debtors' home jurisdiction
The OFT has imposed requirements on a major national retail finance company and issued a warning to the credit industry that taking court action against consumers outside their home jurisdiction is unacceptable.
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The OFT has imposed requirements on a major national retail finance company and issued a warning to the credit industry that taking court action against consumers outside their home jurisdiction is unacceptable.
An OFT investigation into Creation Consumer Finance Ltd, which provides point of sale finance facilities through major retailers, home improvement suppliers and motor finance dealers, revealed that a firm of solicitors acting on behalf of the company was issuing proceedings against Scottish debtors in English courts.
The OFT regards this practice as unfair because the unfamiliar law and procedure involved in a court claim in a different jurisdiction, and any associated travel costs, may deter consumers from defending such action.
The OFT is warning all consumer credit licence holders that taking action or threatening to take action against consumers in a court outside their home jurisdiction is a breach of the OFT's Debt Collection Guidance. Where there is evidence that businesses are engaging in such behaviour, the OFT will take action to ensure compliance with its guidance so that there is no repetition of the practice.
The requirements imposed on Creation Consumer Finance Ltd mean that the company must:
Ray Watson, OFT Director for Consumer Credit, said:
'Issuing proceedings in a different jurisdiction is clearly unacceptable and lenders should take heed that the OFT will act to prevent this practice. Lenders must also be aware that they are fully responsible for the actions of third parties acting on their behalf, and must ensure those third parties do not breach our guidance.'
'Creation Consumer Finance has taken swift action to end the practice and has implemented more stringent procedures for appointing and monitoring solicitors acting on its behalf. We have imposed these requirements in order to ensure that the practice is not repeated.'
NOTES
More...
The OFT has imposed requirements on a major national retail finance company and issued a warning to the credit industry that taking court action against consumers outside their home jurisdiction is unacceptable.
An OFT investigation into Creation Consumer Finance Ltd, which provides point of sale finance facilities through major retailers, home improvement suppliers and motor finance dealers, revealed that a firm of solicitors acting on behalf of the company was issuing proceedings against Scottish debtors in English courts.
The OFT regards this practice as unfair because the unfamiliar law and procedure involved in a court claim in a different jurisdiction, and any associated travel costs, may deter consumers from defending such action.
The OFT is warning all consumer credit licence holders that taking action or threatening to take action against consumers in a court outside their home jurisdiction is a breach of the OFT's Debt Collection Guidance. Where there is evidence that businesses are engaging in such behaviour, the OFT will take action to ensure compliance with its guidance so that there is no repetition of the practice.
The requirements imposed on Creation Consumer Finance Ltd mean that the company must:
- ensure that businesses and/or firms acting as its agent or sub-contractor in the course of any consumer credit licensable business comply with the OFT's Debt Collection Guidance
- not issue and shall ensure that third parties acting on its behalf do not issue proceedings against a consumer in a jurisdiction other than that in which the consumer is domiciled.
Ray Watson, OFT Director for Consumer Credit, said:
'Issuing proceedings in a different jurisdiction is clearly unacceptable and lenders should take heed that the OFT will act to prevent this practice. Lenders must also be aware that they are fully responsible for the actions of third parties acting on their behalf, and must ensure those third parties do not breach our guidance.'
'Creation Consumer Finance has taken swift action to end the practice and has implemented more stringent procedures for appointing and monitoring solicitors acting on its behalf. We have imposed these requirements in order to ensure that the practice is not repeated.'
NOTES
- Creation Consumer Finance is a subsidiary of the LaSer Group, one of Europe's largest loyalty and affinity companies. LaSer is equally owned by Groupe Galeries Lafayette and Cetelem (BNP Paribas Personal Finance).
- The fact that requirements have been imposed on Creation Consumer Finance appears on the OFT's Consumer Credit Register. Download the requirements (pdf 80kb). The OFT will monitor Creation Consumer Finance's compliance with the requirements.
- Consumers who have evidence that consumer credit licence holders or their agents are engaging in this practice are invited to send complaints to: Enquiries, Office of Fair Trading, Fleetbank House,2-6 Salisbury Square, London EC4Y 8JX or enquiries@oft.gsi.gov.uk.
- The Consumer Credit Act 1974 (the Act) requires businesses that offer goods or services on credit and/or are involved in activities relating to credit or hire, such as debt collection to be licensed by the OFT.
- In 2003 the OFT issued the Debt Collection Guidance (updated December 2006) which sets out minimum standards for all consumer credit licence holders intending to collect their own debts or the debts of others. Failure to comply with the Guidance may call into question the fitness of a business to hold a consumer credit licence.
- Where the OFT is dissatisfied with any matter in connection with a business, a proposal to carry on a business or any other conduct by a licensee, associate or former associate, the OFT may impose 'requirements' on the licensed business. Requirements may require a business to do or not to do (or to cease doing) anything specified for the purposes connected with addressing the OFT's dissatisfaction, or securing that matters of the same or a similar kind do not arise. Failure to comply with a requirement can lead to a fine of up to £50,000
- For advice on dealing with debt, see www.direct.gov.uk or contact your local Citizens Advice Bureau.
