OFT Guidance for Debt Collectors Pt 1

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INTRODUCTI0N

 

1.1 The Office of Fair Trading (OFT) has a duty under the Consumer Credit Act 1974 to ensure that licences are only given and retained by those who are fit to hold them. The Act provides that the OFT take into account any circumstances which appear to be relevant and in particular any evidence that an applicant, licensee, or their employees, agents or business associates, past or present, have:

 

• committed offences involving fraud, or other dishonesty or violence

 

• failed to comply with the requirements of credit or other consumer

 

legislation

 

• practised discrimination in connection with their business

 

• engaged in business practices appearing to us to be deceitful, oppressive or otherwise unfair or improper (whether unlawful or not).

 

1.2 Where the OFT has evidence we can take action to refuse or revoke the credit licences of those concerned.

 

1.3 The OFT issued general consumer credit licence guidance to holders and applicants in February 2001. This included guidance on debt collection practices. At the time we indicated our aim to issue further guidance for specific market sectors where problems have been identified or where a more detailed consideration of particular market circumstances would be helpful.

 

1.4 This guidance expands, clarifies and incorporates past OFT guidance and reflects as appropriate responses to our November 2002 consultation paper entitled Debt collection guidance for consumer credit licence holders and applicants.

 

What is the purpose of the guidance?

 

1.5 This guidance is intended to set out the type of behaviour the OFT considers to fall within the category of unfair business practices which will call into question fitness to retain or be given a licence. It is expected that applicants and licence holders will abide by the spirit as well as the letter of this guidance. Publication of this guidance will also enable the OFT to take speedier action against behaviour that clearly falls into the type of categories of unfair practices shown.

 

1.6 This guidance is not designed to be a comprehensive checklist of behaviour. Nor are we advising on best practice or a code of practice. The guidance outlines unfair practices with illustrative examples. The examples given are based on OFT complaint information and issues brought to our attention by organisations representing consumers, business and other regulators.

 

Who does this guidance apply to?

 

1.7 This guidance applies to all consumer credit licence holders and applicants.

 

1.8 Our guidance does not relate to the routine collection of repayments. It applies to the collection of debt once an account is in default. This guidance does not therefore affect the ability of traders who deal in home collection of repayments to visit their customers as those payments fall due.

 

Creditor responsibility for third parties

 

1.9 If consumer credit licence holders choose to do business or continue to do business with third parties engaged in questionable fitness behaviour, then their own fitness will be called into question. Our aim is to ensure that creditors do not ignore the unfair practices of debt collectors, whether in-house or external, acting on their behalf.

 

It is not for the OFT to specify in this guidance how choices about third party selection are made nor to advise on desired conduct between third parties. However, during any investigation in this respect, we would expect to see that care had been taken in the selection process, complaints had been investigated and that firm action had been taken as appropriate. It would be unlikely that we would take action against a creditor who could demonstrate such action had been taken.

 

Communication

 

2.1 It is unfair to communicate, in whatever form, with consumers in an unclear, inaccurate or misleading manner.

 

2.2 Examples of unfair practices are as follows:

 

a. use of official looking documents intended or likely to mislead debtors as to their status, e.g. documents made to resemble court claims.

 

b. leaving out or presenting information in such a way that it creates a false or misleading impression or exploits debtors' lack of knowledge

 

c. those contacting debtors not making clear who they are, who they work for, what their role is, what the purpose of the contact is

 

d. unnecessary and unhelpful use of legal and technical language, e.g. use of Latin phrases

 

e. failing to provide debtors or creditors with information on status of debts, e.g. not providing requested balance statements when reasonably requested

 

f. contacting debtors at unreasonable times

 

g. ignoring or disregarding debtors' legitimate wishes in respect of when and where to contact them, e.g. shift workers who ask not to be telephoned during certain times of the day

 

h. asking or instructing debtors to make contact on premium rate telephone numbers

 

False representation of authority and/or legal position

 

2.3 Those contacting debtors must not be deceitful by misrepresenting their authority and/or the correct legal position.

 

2.4 Examples of unfair practices are as follows:

 

a. falsely implying or claiming authority, e.g. claiming to work on instructions from the courts, claiming to be bailiffs or, in Scotland, sheriff officers or messenger-at-arms.

 

b. falsely implying or stating that action can or will be taken when it legally cannot, e.g. referring to bankruptcy or sequestration proceedings when the balance is too low to qualify for such proceedings or claiming a right of entry when no court order to this effect has been granted.

 

c. misrepresenting status or backing, such as

 

• using a logo which falsely implies government backing

 

• using a business name which implies public body status, or

 

• falsely claiming trade body membership.

 

d. falsely implying or stating that action has been taken when it has not, e.g. that civil action has been taken or that a court judgment has already been obtained.

 

e. falsely implying or stating that failure to pay a debt is a criminal offence or that criminal proceedings will be brought.

 

f. pursuing third parties for payment when they are not liable.

 

g. taking or threatening to take court action in the wrong jurisdiction, e.g. taking action against a Scottish debtor in an English court unless legally justified.

 

Physical/psychological harassment

 

2.5 Putting pressure on debtors or third parties is considered to be oppressive.

 

2.6 Examples of unfair practices are as follows:

 

a. contacting debtors at unreasonable times and at unreasonable intervals

 

b. pressurising debtors to sell property, to raise funds by further borrowing or to extend their borrowing

 

c. using more than one debt collection business at the same time resulting in repetitive and/or frequent contact by different parties

 

d. not ensuring that an adequate history of the debt is passed on as appropriate resulting in repetitive and/or frequent contact by different parties

 

e. not informing the debtor when their case has been passed on to a different debt collector

 

f. pressurising debtors to pay in full, in unreasonably large instalments, or to increase payments when they are unable to do so

 

g. making threatening statements or gestures or taking actions which suggest harm to debtors

 

h. ignoring and/or disregarding claims that debts have been settled or are disputed and continuing to make unjustified demands for payment

 

i. disclosing or threatening to disclose debt details to third parties unless legally entitled to do so

 

j. acting in a way likely to be publicly embarrassing to the debtor either deliberately or through lack of care, e.g. by not putting correspondence in a sealed envelope and putting it through a letterbox, thereby running the risk that it could be read by third parties.

 

Deceptive and/or unfair methods

 

2.7 Dealings with debtors are not to be deceitful and/or unfair.

 

2.8 Examples of unfair practices are as follows:

 

a. sending demands for payment to an individual when it is uncertain that they are the debtor in question, e.g. threatening debt recovery action to 'the occupier' or sending a payment demand to all people sharing the same name/date of birth as a debtor in the hope that contact with the correct debtor will be made.

 

b. disclosing debt details to an individual when it is uncertain that they are the debtor in question, e.g. disclosing details to 'the occupier' of an address.

 

c. refusing to deal with appointed or authorised third parties, such as Citizens Advice Bureaux, independent advice centres or money advisers

 

d. contacting debtors directly and bypassing their appointed representatives

 

e. operating a policy, without reason, of refusing to negotiate with debt management companies

 

f. passing on debtor details to debt management companies without the debtors' informed prior consent

 

g. failing to refer on to the creditor reasonable offers to pay by instalments

 

h. not passing on payments received within a reasonable time resulting in delays that adversely affect a debtor's financial position.

 

i. failing to investigate and/or provide details as appropriate, when a debt is queried or disputed, possibly resulting in debtors being wrongly pursued

 

j. requiring an individual to supply information to prove they are not the debtor in question, e.g. driving licences, passports, full name, date of birth, signatures

 

k. not ceasing collection activity whilst investigating a reasonably queried or disputed debt.

 

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