As bad debt grows, debt collection agencies seem to be exerting greater pressure on debtors in the form of creditor harassment. Whilst peaceful debt collection is legal, creditor harassment isn't. This article seeks to clarify the rights debtors have, as well as providing solutions to help clear debt.
Debt Collection is Regulated by Section 40 of the Administration of Justice Act
"1. A person commits an offence if, with the object of coercing another person to pay money claimed from the other as a debt under a contract, he:
- Harasses the other with demands for payment which, in respect of their frequency, or the manner or occasion of making any such demand, or of any threat or publicity by which any demand is accompanied, are calculated to subject him or members of his family or household to alarm, distress or humiliation;
- Falsely represents, in relation to the money claimed, that criminal proceedings lie for failure to pay it;
- Falsely represents himself to be authorised in some official capacity to claim or enforce payment; or
- Utters a document falsely represented by him to have some official character which he knows it has not.
2. A person may be guilty of an offence by virtue of sub-section (1)(a) above if he concerts with others in the taking of such action as is described in that paragraph, notwithstanding that his own course of conduct does not by itself amount to harassment".
Dealing with Debt Collection and Creditor Harassment
Write to the creditor and fully explain that the debt collector is not acting lawfully. Demonstrate a clear understanding of Section 40 and explain that they need to take steps to prevent this reoccurring. State a preference for being contacted and request that this is confirmed by the debt collection agency in writing.
Inform the creditor of overall awareness of the Office Of Fair Trading guidance notes and that action will be taken to stop creditor harassment if it continues.
Police Assistance with Creditor Harassment
Police prosecution is unlikely, unless there has been an instance of violence, blackmail or fraud. Always keep records of any correspondence or conversations in case these are needed at a later date.
Complain about Debt Collection Practices to Trading Standards
Trading standards will be able to advise whether a debtor has been the victim of creditor harassment. If an offence has been committed it may result in a fine of up to £5000 being imposed by the Magistrates Court. It can also have a serious implications for holding a credit licence.
Offer a Full and Final Settlement to Clear Debts
It may be possible to clear debts by offering a 'full and final settlement' to the debt collection agency. Many collection agencies buy debt from creditors for 20% of the amount outstanding and write off remaining debt against taxes. Offering 35% of the amount being collected may be accepted, but get this in writing before paying anything.
Debt Solutions
If offering a full and final settlement isn't an option, there are a number of alternative debt solutions available. These range from a Debt Management Plan to an Individual Voluntary Arrangement for serious debt. Talk to a qualified debt advisor before proceeding.
Creditor harassment is very unpleasant, but there are ways to control debt collection agencies that usurp their powers. Consider an alternative debt solution method. For example, a Debt Management Plan allows a debt advisor to talk directly to creditors meaning that the debtor no longer has to.
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