Guidance on Consumer Credit Rights
How to Spot Unfair Business Practices of Debt Collecting Agencies
Sep 28, 2009
Consumer credit law demands that businesses in the credit industry must be registered with the Office of Fair Trading (OFT). Those practicing without a license are committing a criminal offense. Furthermore, the OFT has set out guidelines on the fair treatment of debtors. Although most business in the credit industry treat consumers fairly and with due respect, there are a few rogue traders. Similarly, unfair treatment of small businesses by financial institutions can be dealt with by a financial ombudsman. According to the OFT’s handbook Debt Collection Guidance – Final Guidance on Unfair Business Practices (Office of Fair Trading, 2006) creditors would be infringing upon the debtor’s rights if the following applies in their practice:
Fraudulent Practices of Debt Recovery
- Obtaining and/or recklessly passing on of personal information without proper consent (which violates section 55 of the Data Protection Act 1998)
- The use of official looking documents that is likely to mislead
- Falsely claiming authority or acting on legal instructions when this is not the case
- Falsely claiming legal action can be taken such as a right of entry, when this is not the case
- Using a false ID or logo implying a public body or government backing
- The party concerned not making clear who they are and the purpose of the visit
- Unhelpful use of technical jargon or the omitting of important information designed to exploit the debtor’s lack of knowledge
Physical and Emotional Harassment
- Frequent telephoning, particularly at inconvenient times
- Pressuring the debtor to raise funds by borrowing more money or to sell their house
- Demanding unreasonably large installments or a full settlement from the debtor
- Employing more than one debt collection agency
- Non-informant to the creditor if the case has been handed to another agency
- Causing deliberate embarrassment and demonstrating lack of care, for instance, by telephoning the debtor at work or leaving letters unsealed
Inappropriate Practices when Visiting
- Not informing or giving notice of the time and date of the visit
- Acting in a threatening manner
- Visiting the debtor with the knowledge that the person concerned is ill
- Pursuing the visit when the debtor is distressed or it is apparent that they have mental health issues
- Entering the property without permission
- Not leaving the property when requested
- To coerce the debtor into immediate discussions
Inappropriate Practices
- Failing to provide information on the status of the debt or balance statements
- Refusing to correspond with an authorised third party such as a debt counselor or the Citizen’s Advice Bureau
- Bypassing the appointed third party
- Passing on the debtor’s details without prior consent
- Demanding proof of identity to show the person is not the debtor pursued
Unfair Expenses of Debt Recovery
- Demanding that debtors make premium rate telephone calls to the agency
- Charging for collection costs without legal provision
- Adding extra charges disproportionate to the size of the debt
- Not supplying information on charges if default occurs
Debt Collection Solution for the Vulnerable
Those in debt crisis must contact a third party such as a debt counselor or the Citizen’s Advice Bureau for support. The mentally ill and the vulnerable can find further debt assistance from the National Debtline. Most importantly, the credit consumer must know their rights when debt recovery is being undertaken and report unfair practices to the OFT. Evidence of such could result in action being taken and the possible withdrawal of the creditor’s license.
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