The Office of Fair Trading (OFT) in July 2003 (revised Nov 2012) released guidance notes for licensed debt collectors in the United Kingdom setting out the expected standards of all parties involved in the recovery of consumer credit debts.
Reported behaviours of debt collecting companies were used to compile these guidance notes and therefore this is not a comprehensive or exhaustive checklist of unfair or improper acts that the OFT will take into consideration.
Amy Harris, Community Manager for Expert Market UK (offering debt collection services) offers you a guide to debt collection laws in the UK.
The Fitness Test
All businesses undertaking the recovery of consumer related debts, either for themselves or on behalf of another company, are required to hold an appropriate consumer credit licence, unless they are operating under the cover of another group licence (although the latter is more appropriate for law firms and solicitors).
The Consumer Credit Act requires debt collection businesses (under Act 25) to show evidence of any employees, the applicant, licensee, agents or associates that have, at any time:
- Committed fraud, dishonesty or violence
- Failed to comply with the act
- Practised discrimination within the business
- Engaged in deceitful or oppressive business practices
The Act also requires the licensee to have the relevant skills, knowledge and experience within the consumer credit business.
The OFT monitors and assesses the fitness of licence holders and applicants and has the ability to revoke or refuse credit licences or exclude a business, licensee or agency from the cover of a group licence if deemed unfit.
Local Authority Trading Standards offices work with the OFT to ensure practices and procedures are being followed.
The OFT Principles
Principle of fair business practice in the OFT’s view should:
– Treat debtors fairly; debtors should not be subjected to aggressive practices, inappropriate coercion, or conduct which is deceitful, oppressive, unfair or improper, whether unlawful or not.
– Be transparent; information should be made clear and transparent so as not to mislead or confuse.
– Exercise forbearance and consideration; clients or debtors experiencing difficulty should be expected to work together with the debt collection business arranging appropriate times and costs to repay debts. If appropriate, guide debtors to free independent debt advisors.
– Act proportionately; take into account debtors’ circumstances and act appropriately, giving consideration to all options available to assist in repaying the debt.
– Use clear, effective, appropriate procedures and policies; establish, explain and implement procedures and policies to ensure debtors are not left feeling vulnerable or confused.
What is Deemed to be Unfair?
The OFT consider business practices that are unfair or improper. These include:
1. Communication – Communication should be clear, accurate and not misleading. Improper practices include; documents made to resemble court documents, leaving out information in documents or making misleading statements, unnecessary use of legal or technical wording, and contacting debtors at unreasonable times.
2. False Representation of Legal Position – Improper practices include; contacting debtors and being deceitful about their legal position and falsely implying legal action that could be taken (but will not occur).
3. Physical/Psychological Harassment – Putting undue pressure on debtors, contacting debtors at unreasonable times or frequency, threatening third party debt collection, making threatening gestures, suggesting harm to the debtor or acting in a way to publicly embarrass a debtor are all deemed as unreasonable or improper practices.
4. Deceptive and/or Unfair Methods – Unfair or improper practices include; sending demands to an individual when it is uncertain if they are the debtor, contacting debtors directly when they have a third party representative, passing on debtors’ details to debt management businesses and enforcing a debt when a debt relief order (DRO) is in place.
5. Charging for Debt Recovery – Improper practices include; misleading debtors that they are liable to recovery charges when it is not the case, unclear indications of charges in a credit agreement, and applying unreasonable charges.
6. Debt Collection Visits – Debtors should not feel threatened or unclear about the visit. If the debtor is particularly vulnerable or has a doctor’s certificate, they should not be visited. Entering the property without consent is also deemed inappropriate and unfair.
7. Statute Barred Debt – Different laws for England, Northern Ireland, Scotland and Wales exist and should be checked according to area.
8. Data Accuracy – Personal data is subject to many legal obligations in accordance with The Data Protection Act 1988. Personal data should be handled fairly and lawfully and used only for the specified purpose. It is a criminal offence to obtain or disclose personal information by unlawful means. Data should be kept for no longer than is required. Non- compliance of the Data Protection Act may result in loss of one’s Consumer Credit Licence. Accurate data should be passed onto other businesses involved in the debt recovery process and also to Credit Reference Agencies (CRAs) to avoid mistaken identity.
Adherence
The expectation from the OFT for regulated consumer credit businesses is to ensure practices and procedures are in place to comply with the OFT’s guidance and compliance regulations.
Policies, practices and procedures should be relevantly documented and available at all times for inspection by local authority Trading Standards Officers or the OFT.
It is always advisable to seek advice from a relevant free debt advice organisation before entering into any credit agreements.
If a debtor is deemed to have been unfairly treated, they can seek the assistance of either a free debt advice organisation, the OFT, or their local Trading Standards Office.
