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Debt-collection businesses are employed by all sorts of organisations to collect debts people owe for a range of things – from rent arrears and utility bills, to unpaid parking charges and trade debts. Debt-collection businesses are sometimes known as “credit-collection agents” or “debt-recovery agents”.
Debt-collection businesses are currently licensed by the Office of Fair Trading – and the OFT produces guidance on how they should carry out their consumer credit activities. We take that guidance into account when we look into consumer credit complaints about debt collection. We also consider any relevant law, as well as the facts and circumstances of the situation.
We often see similar issues arising in the complaints that consumers refer to us. For example, we see cases where the consumer says that the debt is nothing to do with them. In these cases we would expect the business to provide evidence that clearly shows they have been seeking repayment from the right person.
In other cases we see, consumers complain about the way the business has treated them. Some consumers tell us that the business has tried to contact them too often, or has been rude or aggressive. Others tell us that the business has rejected their repayment proposals out of hand, or is refusing to be flexible.
Our job is to look at the evidence to decide whether the business has behaved fairly.
We are often able to settle complaints involving debt collection by informal agreement. If we find that the business has done something wrong, this might involve compensation for the trouble or upset they have caused the consumer.
Some consumers hope to have their complaint settled by getting their debt written off. But writing off the debt isn’t always the right answer. We are more likely to recommend a suitable amount of compensation, which we calculate by assessing what has happened and how the consumer has been personally affected.
We won’t always tell a business to pay compensation. We might, for example, tell it to accept a reasonable offer of payment made by the consumer.
The case studies that follow illustrate some of the more common situations that we see in complaints involving debt-collection businesses.
Mr K received a letter from a debt-collection business. The letter asked him to reply immediately to confirm that he was the Mr K the business understood was living at that address – because it had “an important personal matter” to discuss with him.
Mr K phoned the number on the letter to find out what it was about. But when he spoke to someone at the business, he was told nobody would be able to talk to him about it – because he hadn’t yet verified his identity.
Concerned that he might be being pursued for a debt, Mr K wrote to the business – using a template he had found on the internet – telling it to stop contacting him unless it had proof that he owed money. But a few days later, he received another letter from the business. This letter said that Mr K owed a sum of money on a credit card account – and asked him to get in touch to discuss repayment options.
Mr K was unhappy that the business had written to him again, and he wrote to them to complain. He pointed out that they still hadn’t shown him any proof that he owed money to anybody, and that they were harassing him.
When the business didn’t respond, Mr K asked us to step in.
We asked the debt-collection business and Mr K to send us all the information that was relevant to the case.
When we looked at the debt-collection business’s records, we were satisfied that they had contacted Mr K on the basis of information they had been given by their client, the credit card company.
We noted that they had traced Mr K using information they had requested from a credit reference agency – and had complied with data protection rules.
But we saw that in their first letter to Mr K, the business had not set out who they were and why they were contacting him – as they are required to do by the regulator. We could understand that this might have caused Mr K concern – and that he would have wanted to clarify the situation.
The regulator also says that if a debt is “reasonably disputed”, a debt-collection business should investigate. But in this case, we saw no evidence that the business had investigated anything. When Mr K had questioned the debt, the business had simply sent him a demand for payment.
Taking everything into account, we decided that – even if it turned out the debt was Mr K’s – the business had failed to act in line with the responsibilities set out by its regulator. We told the business to pay Mr K £50 for the trouble it had caused him.
Miss G was made redundant and went into arrears on her credit card. After a few months, the credit card provider passed her account – with a debt of around £3,000 – to a debt-collection business.
When she received a letter from the debt-collection business, Miss G phoned up to ask whether it would accept a partial repayment. The business said it was willing to settle the account for £1,800. But Miss G said she couldn’t afford that much – and said she would need to think again about her options.
Shortly afterwards, Miss G found out that the claim she had made under her payment protection insurance (PPI) policy had been successful. So she rang the debt-collection business again to ask if she could settle the debt with the £1,200 payout she was expecting.
The adviser she spoke to confirmed that this was possible, and the call ended. But the adviser later phoned back to say that he had made a mistake – and that the £1,200 wouldn’t be enough to settle the debt.
Miss G complained to the debt-collection business, saying she thought it should stick to the amount it had originally told her. The business apologised, but did not agree to settle the debt for the lower amount. Unhappy with this response, Miss G referred her complaint to us.
complaint not upheld
We asked the business how the mistake had come about. It told us that the adviser was new at the time, and unfortunately had given Miss G the wrong answer. From the business’s records, we saw that its adviser had apologised and clarified the situation – after checking with his manager – within half an hour of the original call. So we were satisfied that the business had contacted Miss G as soon as it could after discovering the mistake.
We explained to Miss G that because the business had got back in touch with her so quickly, we didn’t think it was reasonable to expect it to accept the lower amount to settle the debt.
However, the business did accept that its mistake had unfairly raised Miss G’s expectations – and during our investigation, it offered to pay her £150 compensation. We thought this was a fair offer in the circumstances.
In 2010 Mrs L received a letter from a debt-collection business. The letter said that Mrs L needed to pay the business the outstanding balance of a loan she had taken out in 2003 – which stood at around £10,000.
It was the first time Mrs L had been contacted by this particular business. She wrote back to say that she had never had any financial dealings with it – and that she didn’t owe it any money. After that, the business sent Mrs L more letters about the debt – which she did not respond to.
In one of these letters, the business said that it was taking legal action to recover the money it said she owed. Mrs L did not attend any of the legal hearings – and the business obtained a court judgment against her. To try to enforce this judgment, it then took out a “charge” on Mrs L’s house to secure the debt. However, when Mrs L challenged the legal proceedings, the business did not pursue the matter - and the judgment was cancelled.
Two years later the debt-collection business contacted Mrs L again – via its solicitors – asking her to settle the debt. Mrs L wrote back to complain. She said that the business was harassing her, and denied that she owed them any money.
The business rejected her complaint, and told her that it was taking further legal action against her.
Mrs L decided to refer the matter to us.
complaint not upheld
Mrs L told us that she didn’t owe the business anything and she wanted compensation for the stress it was causing her.
She told us that she had paid off the loan she took out in 2003 – but she wasn’t able to send us any documentation to show this.
We asked the debt-collection business for more information about how it had acquired Mrs L’s loan account. It showed us evidence that the lender had passed on the debt in 2010.
We also found that the lender had secured a previous court judgment against Mrs L in 2005 – five years earlier. We noted that Mrs L had not challenged this.
When we asked the debt-collection business why it hadn’t enforced this earlier judgment, it told us that it had made a mistake. It agreed that it shouldn’t have started afresh in 2010, and explained that this was why it hadn’t pursued the matter when Mrs L had challenged the proceedings.
However, the debt-collection business also sent us a copy of the most recent court order – from 2012. This showed that the business had replaced the lender as the claimant, and had been given leave to enforce the 2005 judgment.
When we raised the issue of the 2005 judgment with Mrs L, she told us that is was all in the past, and that it wasn’t relevant to what was happening now. She said she had ignored the letters she received in 2010 because her loan agreement hadn’t been with the debt-collection business – and she didn’t believe she had a case to answer against it.
However, we thought it was likely that Mrs L would have known why the business was writing to her. In our view, by refusing to talk to the business she had made the situation worse. We explained to Mrs L that the latest legal action was linked to the 2005 judgment – and that the new court order meant that any amount she owed was now payable to the debt-collection business. We also told Mrs L that if she wanted to contest the order, she would need to do so in court.
Mr H took out a short-term loan of £3,000. When he didn’t pay it back in the agreed time, the lender passed his account to a debt-collection business.
Two months later the debt-collection business phoned Mr H on his mobile phone and told him he had to repay the money. Mr H explained that his financial situation had changed – and that he wouldn’t be able to settle the debt immediately. He offered to write to the business setting out what he could afford to repay, but the business refused – saying it wouldn’t deal with him in writing.
Over the following weeks, the business called Mr H several times on his mobile. Each time, Mr H asked the business to contact him by letter or email instead. But they continued to phone him.
The business then began phoning Mr H on his work number and leaving messages with his colleagues. Mr H complained. He told the business that the number was a shared office line – and that not only had his colleagues found out about his situation, his employer had also warned that he could be disciplined if the calls continued.
He also said that the business was ringing him too often – and that they were aggressive and making threats. He asked again if the debt-collection business would communicate with him in writing.
But the business insisted that it would keep phoning until a repayment agreement was reached – and it continued to apply interest to his account.
Mr H was angry and beginning to feel desperate. He asked us to look into his situation.
We asked the debt-collection business to send us the relevant phone records – so we could see how much contact there had been with Mr H.
The records showed that after it had first phoned him in the May, the business had phoned him or left voicemails several times a day throughout May and June.
When we listened to recordings of the phone conversations, we noted that the business had also given Mr H misleading information – about both the amount he owed and the steps that could be taken to recover it.
We thought it was understandable that Mr H would want to keep a written record of his contact with the business. We pointed out to the business that the regulator considers it “unfair practice” to disregard debtors’ reasonable requests about when, where and how to contact them.
We also pointed out that by giving out sensitive personal information about Mr H to his colleagues, the business was in breach of data protection rules. We appreciated that this had caused Mr H considerable embarrassment – as well as a lot of concern about the impact on his job.
We were satisfied that the business had been aware of Mr H’s financial difficulties – and had known that he wanted to reach a settlement. In the circumstances, we decided that it should not have continued to add interest to his account. We told the business to refund all the interest and charges they had applied after Mr H had first told them about his change in circumstances – and not to add any more.
We also told them to pay Mr H £300 to compensate for the embarrassment and concern they had caused him. We also told them to work constructively with Mr H to agree a repayment plan for the remainder of the debt.
Mr E took out a home insurance policy, which he paid for by direct debit each month.
A few months into his policy, his insurer’s IT system mistakenly flagged up his account as being in arrears. The insurer phoned Mr E to find out why he had missed a payment. He said that he hadn’t. He explained that he paid by direct debit, that there was money in his current account, and that the payment had always gone through without a problem.
The insurer said it would look into what had happened. But while it was investigating, Mr E’s contact details were passed on to a debt-collection business.
The debt-collection business sent Mr E a letter telling him that his debt had been referred to them, and that they would be seeking to recover the money on the insurer’s behalf. Mr E ignored this letter because he was trying to sort the problem with the insurer directly.
Shortly afterwards, the insurer realised it had made a mistake and sent Mr E a letter offering him an apology and some compensation. But the insurer didn’t let the debt-collection business know that they had sorted things out.
A few days later, the debt-collection business phoned Mr E to discuss how he would pay the unpaid premium. Mr E told them about the insurer’s mistake – and said that he had been sent a letter and offered compensation.
The business asked Mr E to send them a copy of the insurer’s letter. They told him that they would suspend action for two weeks while they waited for a copy of the letter to arrive.
But Mr E didn’t see why he should do anything at all. He was very unhappy about being involved with a debt-collection business in the first place.
Two weeks later, when the debt-collection business still hadn’t received a copy of the insurer’s letter, they phoned Mr E again. He said he wasn’t prepared to speak to anybody about the matter, but that he wanted to complain. He said that the business had been rude to him on the phone two weeks earlier, and that their phone calls amounted to harassment. He also said that the business should speak to his insurer to get them to explain what had happened.
Someone from the debt-collection business phoned the insurer to ask what was going on. The insurer told them that there had been a mistake and that no action needed to be taken.
The debt-collection business wrote to Mr E, saying that they wouldn’t be in touch again. They also said that they had looked into his complaint, and that they had acted in line with “industry guidelines” each time they had been in touch with him.
Mr E was unhappy with the debt-collection business’s response, so he asked us to look into his complaint.
complaint not upheld
When we looked at the evidence, we established that the insurer had instructed the debt-collection business to act on its behalf to recover the unpaid premium.
We noted that the debt-collection business had sent Mr E a letter to let him know who they were, and why they were writing to him. We listened to recordings of the first phone conversation between Mr E and the business. In our view, the business’s representative was polite throughout the conversation.
We also noted that the business had asked Mr E to send them a copy of the insurer’s letter. We thought that had been a reasonable enough request.
When the business got in touch with Mr E for the second time – and Mr E had refused to talk to them – the business had got in touch with the insurer to find out what was going on. Once they knew that the account was settled, they hadn’t phoned Mr E again – but had written to him in response to his complaint.
Taking everything into account, we were satisfied that the debt-collection business had behaved fairly in the circumstances of this case. It had acted in good faith on information provided by the insurer. It had no way of knowing that the insurer had made a mistake in the first place – or that the matter had been settled shortly after the insurer had asked it to recover the money.
We explained to Mr E that the business did have the right to contact him because of the terms and conditions of his insurance policy. Mr E accepted that point, but he was still unhappy that the problem had arisen in the first place. We suggested that he contact his insurer, who would be able to look into the matter further.
ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.
The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.