Every year during the post-Christmas period we see an increase in the number of debt-related complaints referred to us. So in view of the overall economic difficulties, it is no surprise that we are currently seeing more complaints that involve debt.
The ombudsman service is not able to help with debt problems in general. The service we offer is dispute resolution, not debt or money management. So we are not in a position to provide consumers with debt advice or to act as an intermediary, in helping them to negotiate acceptable repayment arrangements with the business that is pursuing them for a debt.
What we can do is to help resolve cases where a dispute has arisen about whether the customer has been treated fairly and reasonably and has received sympathetic and positive treatment in respect of financial hardship. Where it appears to us that a consumer would benefit from specialist debt-counselling, we give them contact details for the main cost-free agencies that could help them.
This set of recent case studies illustrates some of the more common types of complaint referred to us involving debt. These include complaints where consumers:
Mrs C complained to a debt-collecting company that it was causing her 'considerable distress' by the way in which it was 'harassing' her with 'threatening letters and phone calls' about a credit card debt.
The company did not accept that she had grounds for complaint. It said it had not harassed or threatened her in any way and it denied having contacted her 'excessively'.
It agreed that it had tried to contact her on a number of occasions. However, it said this was because it was having so much difficulty getting any response at all from her. She had failed to answer its letters and had not been prepared to talk on the phone.
Unhappy with this response, Mrs C referred her complaint to us.
complaint not upheld
We asked the company for copies of all the letters it had sent to Mrs C. We also asked for details of the dates, times and duration of all the calls it had made to her, together with recordings of the calls.
We noted that there had been relatively few letters. They were all brief and clear and we thought them polite and helpful in tone.
There had also been relatively few phone calls. These were all of very short duration and had been made during normal working hours. The dates and times of the calls tied-in with the dates and times that Mrs C had given us, when we asked for details of the calls she had received.
The recordings of the calls confirmed what the company had said about Mrs C's failure to engage in any meaningful conversation during these calls. As soon as she had realised who was calling she had simply said she was too busy to talk - and had then hung up.
We did not uphold the complaint. We explained to Mrs C that she was not helping her own situation by ignoring the debt-collecting company - and her debt. We gave her details of a debt advice organisation that could give her free advice and assistance and that could liaise with the debt-collecting company on her behalf, if she wanted it to do that.
Mr B complained about a debt management company that he said had taken his money 'under false pretences'.
He had contacted the company after seeing it advertise in his daily newspaper. He explained that he owed money on a number of credit cards and store cards and was starting to find it difficult to afford even the minimum repayment requested each month.
Mr B subsequently signed a contract for the company's services, committing him to pay an initial fee and then a monthly administration fee.
A few months later he complained that the company had 'failed to get rid of the debts'. He said it had led him to believe that it would negotiate with all his creditors and arrange for his debts to be written-off.
The company told him it did not consider he had any grounds for complaint as it had never promised to get any of his debts written-off. It pointed out that it had negotiated successfully on his behalf with more than ten creditors and had agreed reduced repayment arrangements with each of them. Dissatisfied with this response, Mr B referred his complaint to us.
complaint not upheld
We asked to see the contract that Mr B had signed, together with all the letters and other documents that the debt management company had sent him. We also obtained a recording of Mr B's initial phone call to the company, when it had outlined how it could help him and what it would charge for its services.
We noted that the company had explained very clearly to Mr B - both on the phone and in writing - that it would contact all his creditors and try to agree with each of them a 'managed repayment plan'. The company had also explained very clearly what it would charge Mr B and how it would pass on his agreed repayment amount each month to each of the creditors. When explaining on the phone to Mr B how it would negotiate a repayment plan with each of his creditors, the company's representative had said that he 'occasionally' managed to get a client's debt 'written-off altogether'. However, the representative had also made it clear that the more usual outcome was that a creditor would agree to accept reduced repayments, over a longer term.
We were satisfied, from the evidence, that the company had put a significant amount of effort into negotiating with Mr B's creditors. In each instance it had successfully agreed reduced repayment arrangements.
We explained to Mr B why we did not think the debt management company had done anything wrong and why we could not uphold his complaint.
Miss J, who worked as a fitness trainer at her local gym, had been finding it difficult to manage all her financial commitments even when she was working full-time. So when her working hours were substantially reduced she soon realised she was in serious financial difficulties.
She later told us that with what seemed to be 'perfect timing' she received a phone call 'out of the blue' from a debt management company. The company representative had explained that he was calling residents in her area to outline the services the company could offer to 'suitable people'.
Miss J was impressed by what he said the company could do for her and she agreed that he should send her a brochure and application form. She subsequently signed a contract with the company, paying a one-off 'set up' fee and agreeing to an ongoing monthly administration fee.
A few months later, Miss J sent the company a letter of complaint. She said she had only signed-up for its services because it had led her to believe it would get most of her debts written-off. However, it seemed to her that all it had done was to negotiate reduced repayment arrangements with one of her four creditors.
In response, the company sent Miss J a lengthy reply from its solicitor, refuting her complaint and concluding that the company had 'complied with the contract and the law'.
Miss J then brought her complaint to us. She said she had been unable to understand large sections of the solicitor's letter because it contained so much legal jargon. However, she was unhappy that her concerns appeared to have been dismissed.
We reviewed all the documents that the company had sent Miss J. The letter from its solicitor argued that the contract she had signed did not contain any 'guarantee' that her debts would be written-off.
We accepted that - technically - there had been no 'guarantee'. However, we thought the wording of the company's brochure was unclear about a number of key points. In particular, we thought that any reasonable person reading the brochure would be given the impression that the company would arrange to 'remove' most of their debts.
We concluded that Miss J would never have signed the contract if she had been given clear information about what the company would actually do for her.
We upheld the complaint. We told the company to refund all the fees it had charged Miss J, together with interest. We also told it to pay her an additional £150, in recognition of the distress and inconvenience it had caused her by its poor handling of her complaint.
Mrs A was being pursued by a loan provider for a debt that she did not think she should be required to pay.
After reading on an online forum that debts could be written-off if the loan provider could not supply a 'true copy' of the original loan agreement, she asked the loan provider to send her a photocopy of the original agreement containing her signature.
The loan provider said it was unable to do this as it no longer had the original agreement. It sent her instead a reconstituted agreement containing all the original terms and conditions. Mrs A responded by saying the loan provider should stop making demands for repayment as the debt was 'now unenforceable in law'.
The loan provider said that Mrs A was mistaken about this. She therefore referred the dispute to us and asked us to confirm that the debt was 'legally unenforceable'.
complaint not upheld
We told Mrs A that we did not have the power to declare whether or not credit agreements are legally enforceable, as that is something for a court to decide. However, we said we were able to look into her complaint on the basis of whether the loan provider had treated her in a way that was fair and reasonable.
After obtaining evidence from Mrs A and the loan provider, we established that she had taken out the loan nearly ten years earlier, to pay for some computer equipment. She had been in arrears with her repayments for most of that time. At one stage she had tried to persuade the loan provider to accept a 'partial payment in final settlement of the total amount outstanding'. And for nearly three years before that she had been paying the loan provider just £1 per month.
When Mrs A had first contacted us, she told us there had 'always been considerable doubt' about whether the debt was hers at all. So we asked her to tell us why she thought the debt might not be hers. We also asked why she had continued making payments for some years - and had made an offer to settle the debt - if she did not believe she owed any money. All she told us in response was that she had not known what else to do.
It was clear from the evidence that Mrs A had taken out the loan and we thought it was fair and reasonable for the loan provider to seek repayment of the debt. We also thought that the loan provider had fully complied with its responsibility to deal with Mrs A's situation sympathetically, in view of her financial difficulties.
We explained this to Mrs A and gave her details of free money advice organisations that she could contact for help in managing her debts. We did not uphold her complaint.
Mr W was in dispute with a debt-collecting company about a credit card debt of £1,500. He insisted that he knew nothing about this debt and he said he thought he had been the victim of fraud.
He told the company that only a few months earlier a different debt-collecting company had contacted him about a debt of a similar size with a different credit card company. In that instance, the debt had been written-off after he had been able to prove that the signature on the application form for the card was not his.
He explained that a number of his belongings had been stolen - including documents containing personal information - during a break-in at his previous home, very shortly before he had moved out. He thought that someone must have used those stolen documents to open several accounts in his name.
When the company disregarded this explanation and continued to pursue Mr W vigorously for the debt, he referred his complaint to us.
We asked the company to send us copies of all the documents it had in connection with this credit card debt. In particular, we wanted to see the original application for the credit card. However, the only documents the company was able to send us were copies of credit card statements, all addressed to Mr W at the house where he used to live.
Mr W produced evidence confirming details of the break-in at that address. And we noted that the credit card statements forwarded to us by the debt-collecting company had all been sent to that same address, some time after he had moved away.
We were satisfied, from what we had seen, that Mr W had been the innocent victim of identity theft and had truly not taken out the credit card.
We upheld the complaint and told the company that, as it had insufficient evidence to show that Mr W owed the debt, it should stop pursuing him for the money. We said it should remove his details from its records and ensure that no adverse information about this debt was registered with any credit reference agency. We also said it should pay Mr W £200, in recognition of the inconvenience it had caused him.
Miss G complained that her credit card provider had failed to amend its records correctly after it had agreed a reduced monthly repayment plan with her. As a result, the card provider had contacted her to tell her she was in arrears, even though she had maintained her monthly repayments at the agreed new level. She was also very unhappy to discover that missed payments had been registered on her credit file.
The card provider denied having made any mistake. It told Miss G it had never agreed a repayment plan with her - it had simply said it would accept reduced repayments as a temporary measure, for up to three months. It said it had contacted her about arrears because she had continued paying at the reduced rate beyond the agreed three months.
Unhappy with this response, Miss G referred the dispute to us.
complaint not upheld
We established that Miss G had contacted the card provider shortly after losing her job. She told us she had explained that she was experiencing financial difficulties and could no longer afford the minimum repayment amount required each month.
After discussing the situation with her, the credit card provider had agreed to accept reduced monthly repayments of £20. It told us that it had agreed to this for no more than three months, to help Miss G through what she had said were 'short-term financial difficulties'.
However, Miss G maintained that it was her 'clear understanding' that the card provider had agreed to this monthly amount as part of a 'long-term repayment plan', to last at least until she was able to secure another job.
We listened to a recording of Miss G's initial phone call to the card provider, when she had told it of her financial difficulties. She had said she was 'very hopeful' of finding another job within the next three months but that she was 'currently' unable to afford a monthly repayment of more than £20.
The card provider had told her that it would suspend charges on her account for three months and would accept monthly repayments of £20 for that length of time. It had also said that she should get in touch again to discuss her account if she found she needed a longer-term arrangement.
When Miss G had carried on paying just £20 a month for longer than the agreed three months, the card provider had written to her. It had expressed concern about the arrears on her account and had said she should get in touch to discuss making a formal repayment arrangement if she was still in financial difficulties.
Miss G had contacted the credit provider after receiving this letter - but only to insist that she had already agreed a repayment arrangement and that the credit provider must have made a mistake in its records.
We concluded that the credit card provider had not made any formal repayment arrangement with Miss G. It had agreed to accept reduced payments as a temporary measure - for three months. Those repayments were substantially less than her contractual monthly minimum repayment of £120, so we did not think it unreasonable of the card provider to contact her about the arrears on her account.
We did not uphold the complaint. We encouraged Miss G to accept the formal repayment arrangement that the credit card provider proposed after she referred the complaint to us.
Initially, she said she would only accept the repayment arrangement if the card provider removed the adverse information it had put on her credit file. However, we pointed out that the card provider had only started putting information on her credit file after it had written to her about its concerns that she was continuing to pay just £20 a month.
We told Miss G that the information on her file was a fair and accurate reflection of her account status. There were therefore no grounds for asking the card provider to amend or remove it.
A self-employed landscape gardener, Mr M, complained to a loan provider that its persistent letters and phone calls were causing him 'considerable distress'.
The loan provider got in touch with him several years after he had agreed to act as guarantor for a loan taken out by his daughter. She had fallen seriously behind with her repayments after losing her job and the loan provider wrote to Mr M, telling him he was responsible for ensuring all future repayments were made in full.
Mr M wrote back to say that he would do what he could. However, as his own financial position had 'worsened very considerably' over the past year, he could not afford to pay as large an amount as the loan provider was demanding.
The loan provider never responded to this letter. But just over a week after Mr M had sent it, he began receiving standard letters from the loan provider - demanding payment. He ignored the first of these, assuming it was computer-generated and had been sent in error.
When he received another demand for payment a few weeks later he wrote to the loan provider again. This time he enclosed detailed statements of his income and expenditure. He asked if he could make payments at a reduced rate and explained that his business had been badly affected by the downturn in the economy, as well as by his inability to work at all for several months because of ill-health.
The loan provider failed to reply to this letter so Mr M made a number of attempts to make contact by phone in order to discuss his situation. He said that each time he rang he was simply told that someone would call him back the same day. However, this never happened.
Soon after this he began getting several phone calls a day from the loan provider, sometimes late at night. The staff who called him appeared to have no knowledge of his earlier correspondence - and no interest in discussing his circumstances. They simply demanded payment, in a way he said he found 'intimidating and upsetting'.
He then sent a letter of complaint to the loan provider's head office. The reply, sent some weeks later, failed to address any of the points he had made but asserted that the loan provider acted 'at all times in accordance with the law'.
Mr M then referred his complaint to us.
We were satisfied from the evidence that Mr M was experiencing genuine financial difficulties and could not afford the full amount that the loan provider was seeking each month. He had, however, agreed to make regular payments and had asked the loan provider to discuss with him the minimum amount it would accept.
The loan provider could not give us any explanation when we asked it why it had never responded to this request. After looking at the loan provider's letters to Mr M, and at its own internal notes on the case, we concluded that it had deliberately ignored his letters and phone calls and had pursued him for payment in an unreasonable manner.
We upheld the complaint. We reminded the loan provider that it was required to treat consumers positively and sympathetically if they were in genuine financial difficulties. We said it could not ignore this obligation simply because Mr M was a guarantor for the loan, rather than the person who had originally taken it out.
We told the loan provider to reach agreement with Mr M on an affordable repayment plan that took proper account of his financial circumstances. We said the loan provider should also remove all the 'late payment' and other administration charges that it had applied to the account since it had first contacted Mr M about the debt. And we said it should also pay him £300 to reflect the distress and inconvenience it had caused him.
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.