Heavy-handed debt collectors given little credit by OFT

[Legal Beagles]

Official complaints about ruthless debt collectors rose by more than a third last year, the Office of Fair Trading revealed today

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[LuggerBugs]

Re: Heavy-handed debt collectors given little credit by OFT

What abot THIS then. From the OFT website. Obviously, we can't speculate as to the companies concerned as we don't want to face any litigation taken against the site. But we CAN all hope in our own minds that we DO know who some of them are.

Newsroom

Press releases 2008


OFT warns 13 companies about their debt collection practices

47/08 9 April 2008
The OFT has today issued warnings to 13 companies including debt collection agencies and financial institutions telling them that they need to take steps to improve their debt collection practices.

The OFT's debt collection guidance sets out minimum standards for those intending to collect debts that have arisen under consumer credit agreements. The action taken by the OFT against the consumer credit licence holders is a response to a marked increase in consumer complaints received by the OFT about debt collection practices. The OFT found that these companies had generated some of the more serious complaints which involved:

• chasing consumers for payment of debts they did not owe
• failing to properly investigate disputed debts
• failing to carry out sufficient accuracy checks on data received from creditor clients and/or credit reference agencies
• contacting debtors at unreasonable times and intervals, threatening home visits when debts were disputed, and
• refusing to deal with or bypassing third party consumer representatives such as Citizens Advice Bureaux.

The companies have been given four weeks to respond and the OFT will consider taking action against any business which fails to address the concerns raised, up to and including revoking their consumer credit licences.

David Philpott, OFT Deputy Director of Consumer Credit, said:

'It is unacceptable for debt collection businesses to engage in unfair practices and we will continue to take action where we find evidence of this. One of our main priorities is to protect consumers who may already be vulnerable as a consequence of serious debt problems.'

NOTES
1. The Consumer Credit Act 1974 (the Act) requires debt collectors, businesses that offer goods or services on credit and/or are involved in activities relating to credit or hire to be licensed by the OFT. Following implementation of the OFT's new powers under the Consumer Credit Act 2006 on 6 April 2008, the companies could also have specific 'requirements' imposed on them by the OFT. If such a requirement was not complied with, the business concerned could be subject to a financial penalty of up to £50,000. The OFT can also refuse or revoke a licence if it decides that a trader is not fit to hold one. The OFT can take into account any circumstances which appear to be relevant when considering the fitness of an applicant or licensee, including evidence that the company has contravened the Data Protection Act 1988.
2. Decisions to refuse or revoke a consumer credit licence or to impose a requirement or financial penalty are made by an adjudicating officer for and on behalf of the OFT. Before a decision is made, the adjudicating officer issues a notice to the trader. The trader is then given the opportunity to make representations to the adjudicating officer. In the event that the determination is adverse, the trader has the right of appeal against the determination to the Consumer Credit Appeals Tribunal.
3. The 13 companies involved have specifically been asked to review their policies and procedures for tracing debtors, including keeping client data up to date and maintaining its accuracy. The OFT believes that insufficient accuracy checks carried out on data received from creditor clients and/or from credit reference agencies, contrary to the Data Protection Act 1988 and the OFT's guidance, lie at the heart of many complaints. The OFT will be writing to the main trade bodies for creditors and the debt collection industry recommending that they take action to improve the quality of base data used for debt collection in order to improve compliance with the OFT's guidance.
4. The OFT has not disclosed the names of the companies subject to these informal actions. Under legal restrictions relating to disclosure of information, a public authority such as the OFT may commit a criminal offence if it discloses certain specified information relating to a business or individual, which it obtains in connection with the exercise of its functions.
5. The Consumer Credit Act 2006 requires the OFT to take into account 'credit competence' when assessing the fitness of new applicants to be licensed. Businesses operating in a high risk part of the market such as the debt collection sector are now subject to greater scrutiny at the licence application stage and greater monitoring throughout the life of the licence. A failure to comply with the OFT's debt collection guidance, issued in July 2003, would call into question a licensee's fitness. Unfair business practices outlined in the guidance include: failing to investigate disputed debts, pursuing third parties for payment when they are not liable, communication with consumers in a misleading or deceitful manner, and behaving in a threatening manner towards debtors and bypassing or refusing to deal with third party representatives.
6. Since the OFT's debt collection guidance was issued in 2003, action taken by the OFT has resulted in the issue of nine notices to debt collectors that the OFT was minded to refuse or revoke their credit licences and a total of 137 warning and advisory letters have been sent to 120 licensees.
7. The Credit Services Association (CSA) estimates that there are around 450 to 500 debt collection businesses in the UK (where debt collection is the primary activity) of which approximately 292 are members of the CSA.
8. OFT advice for those being pursued by debt collectors is: don't panic or ignore the problem, seek help and advice from your nearest Citizens Advice Bureau and contact those who you owe money to as soon as possible.
9. On 6 April 2007, the jurisdiction of the Financial Ombudsman Service (FOS) Alternative Dispute Resolution scheme was extended to cover consumer credit (Consumer Credit Jurisdiction). The Consumer Credit Jurisdiction provides consumers with an effective means of resolving consumer credit disputes which have occurred since the scheme's start date if the consumer has failed to satisfactorily resolve the matter directly with the consumer credit licensee itself. The FOS can be contacted at:

The Financial Ombudsman Service
South Quay Plaza
183 Marsh Wall
London
E14 9SR
Telephone: 0845 080 1800