Debt Collection Agencies/Refunds

[Bill-K]

Re: Debt Collection Agencies/Refunds

...After receiving the notice, the debtor will be entitled, of course, to require a sight of the assignment so as to be satisfied that it is valid, and that the assignee can give him a good discharge."

If this could be turned into a letter requesting sight of an assignment, it would put a nice stop to the DCA's little tricks of misleading us as to what type of assignment has taken place.

This wouldn't in itself answer the question posed, but it would stop us barking up the wrong tree for a while.

Excellent find Labman !!! If it's a piece of Denning caselaw, then it's almost as good as statute, innit ? Is such assignment covered by the CCA does anyone know ?

The piece from Pinsent Masons is a synopsis of PS 10/12. Although based on law, these are FSA guidelines. I prefer to refer to them as FSA rules, myself, as it gives them a little more weight. With PPI issues, it is generally accepted that reliance on the FSA rules is the best way forward. The FOS takes ages, but their eventual ruling can be enforced in court (in theory !) Going directly through the courts seems to be very risky - I'm not sure why this is, but EXC seems to understand why.

Re: Debt Collection Agencies/Refunds

Heavy, but interesting reading from Pinsent Masons. It states clearly the customer should be put back in the position they were in before they purchased the ppi.

http://www.out-law.com/page-10509

Re: Debt Collection Agencies/Refunds

I've just stumbled across this interesting ruling:

In Van Lynn Developments Ltd v Pelias Construction Co Ltd [1968] 3 All ER 824, Lord Denning repeated below for your commented:

“It seems to me to be unnecessary that it should give the date of the assignment so long as it makes it plain that there has in fact been an assignment so that the debtor knows to whom he has to pay the debt in the future. After receiving the notice, the debtor will be entitled, of course, to require a sight of the assignment so as to be satisfied that it is valid, and that the assignee can give him a good discharge."

If this could be turned into a letter requesting sight of an assignment, it would put a nice stop to the DCA's little tricks of misleading us as to what type of assignment has taken place.

This wouldn't in itself answer the question posed, but it would stop us barking up the wrong tree for a while.

[Bill-K]

Re: Debt Collection Agencies/Refunds

For info, this is the FSA rule from the PPI Redress Handbook in PS 10/12. The 'Alternative redress' is where the complainant would have bought PPI elsewhere at a cheaper rate, in which case a reduced payout is made.
" DISP APP 3.7.2 Where the firm concludes that the complainant would not have bought the payment protection contract he bought, and the firm is not using the alternative approach to redress (set out in DISP App 3.7.7 E to 3.7.15 E) or other appropriate redress (see DISP App 3.8), the firm should, as far as practicable, put the complainant in the position he would have been if he had not bought any payment protection contract. "

Where the OC has admitted mis-selling, then DISP APP 3.7.2 seems to say that they should refund to the borrower the PPI already paid to them, and then re-schedule the remaining debt without the PPI - effectively reducing balance owing, and thus the remaining payments. If the debt has been passed to a DCA for collection only (equitable assignment), then of course the payments should be reduced as above.

Where the debt has been absolutely assigned, then perhaps we should remember that what was 'bought' by the DCA was the remaining debt, plus the right to collect payment on it, etc. So, the OC kept the payments received by them, and did not pass them to the DCA. Therefore, IMO the OC should refund the PPI portion of those payments to the borrower, and not to the DCA - because the DCA was never 'assigned' that part of the debt. The DCA for their part, has similarly inherited the obligation to refund the PPI portion of all payments made to it and re-schedule the remaining debt as above. However, assuming that this debt was in arrears when the DCA acquired it, then I think they will have the right to reduce the balance owing by crediting any refundable PPI to it. This follows the principle of the 'Right of Set-Off' as shown in Di's post above, and is 'nailed down' in DISP APP 3.9.1:-
" DISP APP 3.9.1 Where the complainant’s loan or credit card is in arrears the firm may, if it has the contractual right to do so, make a payment to reduce the associated loan or credit card balance, if the complainant accepts the firm’s offer of redress. The firm should act fairly and reasonably in deciding whether to make such a payment. "

So, I think if the FSA rules are to be properly observed, the type of assignment is an important factor. If it is equitable, then the OC appears to have the right to use any PPI redress toward clearing arrears. But if the assignment is absolute, then the OC should make a refund directly to the borrower, and passing it to the DCA is misappropriation. The DCA has no right to this money, as it was never a part of any agreement with the OC.

What need not concern us - but may be worth considering - is that if the DCA bought the debt in 'absolute,' then the price they paid for it should technically be reduced to account for the fact that the debt is worth less than when they originally bought it. OK - this is not our problem - but I daresay the DCA will be seeking compensation from the OC for this. It strikes me as quite likely that the OC might attempt to 'mitigate' this further loss by paying all or part of the borrower's PPI refund to the DCA instead of to the borrower, in lieu of a compo payment to the DCA. This may be one reason why our PPI refunds are 'redirected' in this way sometimes.

If this happens, I guess we have to insist on a clear letter of assignment, stating equitable or absolute. If it's absolute, then I think we may have a good case to demand our PPI to be refunded directly to us.

[di30]

Re: Debt Collection Agencies/Refunds

Ok this was 2004, wonder if there's been any changes of updates within the FOS since this one?

http://www.financial-ombudsman.org.u.../40_setoff.htm

Nothing though in regards of absolute or equitable assignments!
banking: firms' right of "set off"

It is not unusual for a customer to have a current account, a savings account and a credit card account – all with the same bank or building society. The same customer might also have a loan, an ISA and a mortgage with that firm. And some of those accounts might be held jointly with someone else, usually a spouse or business partner.
In this article we look at what the firm can (or should) do where a customer does not have enough money in a particular account to make payments due from that account, but does have sufficient funds in one of their other accounts with the firm.
For example, when an overdraft facility on a current account runs out and the customer fails to pay the amount owed, can the firm take money from the customer’s savings account to reduce or clear the debt? Or, if a customer fails to make credit card or mortgage payments, should the firm use available funds from that customer’s current or savings account to make the missing payments, thereby helping the customer to avoid extra interest or charges?

The basic position is that a firm has a right – but not a duty – to look at a customer’s overall position and to "combine" the accounts held by that customer. This is sometimes called a right of "set off" or a right to "combine" accounts. A firm has this as a general right, whether or not it mentions the right in the account terms. So, in the examples above, the firm can transfer money from an account that is in credit in order to make payments due on another account. But it does not have to do this.

Certain conditions must be met before the firm can exercise its right of "set off".

• the account from which the firm transfers funds must be held by the customer who owes the firm money.
• the account from which the firm transfers the money – and the account from which the money would otherwise have come – must both be held with the same firm.
• the account from which the firm transfers funds – and the account from which the money would otherwise have come – must both be held in the same capacity by the customer concerned. So, for example, if Mrs C holds a savings account in her capacity as treasurer of a local society, the firm cannot take money from that account to pay Mrs C’s personal credit card bill that she normally pays from the current account she holds in a personal capacity.
• the debt must be due and payable. For example, if a customer misses making a loan payment, then (at least until it calls in the loan) the firm can take only the missed payment – not the balance of the loan.

We would not usually expect a firm to warn customers before it exercises its right of "set off". A warning might prompt customers to move their money to an account with a different firm. But we think that it is usually good practice for a firm to tell a customer as soon as possible after it has made a transfer.
We would not generally expect a firm to use "set off" before giving the customer a reasonable opportunity to pay the debt. However, what is "reasonable" might depend on the customer and the history of the account.
The general position can be modified by agreement between the firm and its customer. This might include:

• an agreement that "set off" be available to a firm’s mortgage arm, where it is a separate legal entity;
• an agreement to regularly "sweep" any money over a certain balance out of a current account and into a savings account;
• an agreement that money held by a customer in one capacity can be used to pay debts owed by the same customer in a different capacity.

Re: Debt Collection Agencies/Refunds

Picking up on something I read earlier around this (may have been a post on here, I've read a bit about it today!) one bank said it was their policy to use the money against the debt. I guess, if they've sold their own product, there might be some mileage in this, but there's still the issue of putting the customer back in the position they were prior to taking out the ppi.

With a DCA under an Absolute Assignment it is totally different. There is no legislation of which I'm aware which allows them to decide where the money goes.

I've read a fair bit today that it constitutes fraud, and possibly theft.

[di30]

Re: Debt Collection Agencies/Refunds

I was actually surprised to have read that the debtor I posted of earlier, their complaint was resolved directly with the bank, and did not have to go to the FOS, this is why we are now just waiting the 28 days to see if the cheque does actually get paid directly to the debtor, otherwise it may yet be the case, depending on what happens.

Yes that is correct labman, they are supposed to put you back in the position as if there were no ppi. So with being deprived of the mis selling of PPI, it should go back to the customer.
They just seem to believe it's a right of duty they have as such to claw back the PPI.

So realistically if the account that included ppi went to a DCA, the PPI would be worthless to the customer anyway, because your not able to make a claim for sickness/ppi etc, and the fact that it can no longer be used, it should be as you said really back to the customer of payments they made to the account of the PPI.

The loan without the PPI, fair enough if that ends up with a DCA.., good point!

Re: Debt Collection Agencies/Refunds

It often has to be challenged through the FOS.

I'd be interested to know under what legislation they can put the money towards the debt. As I mentioned previously, if you had not taken out the ppi, the money would be in your pocket. You were mis-sold the ppi, so surely you should be put back in the position you were before it was taken out -ie- the money should be in your pocket!

Anyone know the legislation they claim they use, as this is different to the right of offset by banks isn't it?

[di30]

Re: Debt Collection Agencies/Refunds

I've come across cases where the money has gone to the debtor as well Di.

A mixed bag then of some receiving refunds and others not.

Re: Debt Collection Agencies/Refunds

I've come across cases where the money has gone to the debtor as well Di.

[di30]

Re: Debt Collection Agencies/Refunds

As you are aware, I am almost everywhere across consumer sites, I have just come across a post and the customer's complaint was upheld via PPI, and the debt is fully assigned (absolute) to a DCA.
The customer was informed by the OC that a cheque should arrive by 28 days, but we are waiting to see what happens from here now.

Re: Debt Collection Agencies/Refunds

Sorry if I seemed to be 'incinerating' there, Labman. I just didn't want to overload Di's thread with a load of maths (always a passion-killer). If it's a relevant part of the discussion, then it's fine by me, if it's fine by Di. The way you have put it seems to justify it to some extent - thank you !!!

Cheeky burger - it justifies it totally.

[jax50]

Re: Debt Collection Agencies/Refunds

I don't think the initial question was about who is responsible in debt reassignment, I think it was more to do with who should be paid the money, the borrower or should it be put towards the debt. I may be wrong - it was late! :tinysmile_grin_t:

I agree, this is certainly the question..and who decides because some cases seem to be cash refunds while others are offset against the debt. So what, if any, are the 'rules' ? And for me, how can an OC assign in full and have no 'interest' yet still retain a right to buy back the debt...how does that work ?

[Bill-K]

Re: Debt Collection Agencies/Refunds

Sorry if I seemed to be 'incinerating' there, Labman. I just didn't want to overload Di's thread with a load of maths (always a passion-killer). If it's a relevant part of the discussion, then it's fine by me, if it's fine by Di. The way you have put it seems to justify it to some extent - thank you !!!

Re: Debt Collection Agencies/Refunds

It can seem complex - and I confess that I'm no good at explaining stuff. If you go through it enough times, then hopefully, it all eventually clicks into place.

BUT - let's not hi-jack Di's original thread purpose, which is (I think) to establish exactly who becomes responsible for PPI redress when a debt is 're-assigned.' I think the calculations should follow from this discussion, and not lead it.

The ppi calculations seem logical and straightforward actually Bill.

The reason I asked the question was not to hi-jack the thread, it was asked as I am wondering about the legalities of assigning a debt, part of which may remain elsewhere. I'm also wondering about the legalities of them using the reclaimed money to go towards paying of the debt, rather than sending it to the debtor.

Had the borrower not been mis-sold ppi, the money would always have been in their pocket. I'm wondering what gives them the legal right to use the borrower's own money to repay their loan. For all they know, that money could go to another loan to stop the borrower being made bankrupt and their loan being written off altogether.

I don't think the initial question was about who is responsible in debt reassignment, I think it was more to do with who should be paid the money, the borrower or should it be put towards the debt. I may be wrong - it was late! :tinysmile_grin_t: