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debt collecting

what this note covers

This note explains our approach to complaints about debt collecting. This is where a third-party debt-collection agency - (one that is separate and distinct from the original lender) - has been employed to recover a debt. This note doesn't cover complaints where the lenders themselves are trying to collect a debt they are owed.

Debt collectors have been regulated by the Financial Conduct Authority (FCA) since 1 April 2014 – and were previously licensed by the Office of Fair Trading. They are employed by all sorts of organisations to collect debts owed for a range of things. They are sometimes also known as credit-collection agents or debt-recovery agents.

complaints we can look at

Previously, we could only consider complaints about debt collectors where the complaint was about an attempt to collect a debt that originated from a regulated consumer-credit or consumer-hire contract.

The position changed on 1 April 2014 when regulation passed from the OFT to the FCA.

We can now consider complaints about collecting debts that arose from exempt consumer credit and consumer hire agreements – even if the event happened before 1 April 2014.

We can also consider complaints about debt collection arising from certain peer to peer agreements. However peer-to-peer lending only became a regulated activity on 1 April 2014 – so we can only consider complaints if the event was after this date.

This still means that we can’t deal with complaints about the collection of debts such as:

  • council tax
  • utility bills or
  • rent arrears.

Where consumers are concerned about issues relating to the collection of debts like these, we usually refer them to Citizens Advice.

For complaints referred to us before 1 April 2014, we follow the rules as they stood before that date.

who can complain to us?

Before 1 April 2014, our rules allowed us to deal with a complaint brought by someone that the debt collector has sought to recover payment from under a regulated consumer-credit or consumer-hire agreement. This is still the case for complaints referred to us before 1 April 2014.

However, from this date, new rules apply and we can consider complaints where someone is being asked to repay a debt that arises from an exempt consumer-credit or consumer hire agreement.

So if the complaint is about debt collecting, and the person complaining is the person who has been asked to make payment, we can deal with the complaint.
If the debt collector isn’t actually seeking payment from the consumer, we can’t generally consider a complaint from that person. So, for example, a consumer who simply receives a letter or telephone call from a debt collector intended for a previous resident at their address can’t normally complain to us about receiving the communication.

But the position may be different where the debt collector, knowing that the person owing the debt no longer lives at an address, continues to communicate with the consumer in a way that suggests indirect pressure on the consumer to pay the debt. We most frequently see this in complaints where:

  • one partner in a relationship has left the family home; or
  • a grown-up child has left the parental home.

did the debt collector do anything more than trace the consumer?

Debt collectors are sometimes employed by lenders and hirers simply to trace a consumer - so the original lender or hirer can then seek repayment of the debt themselves. We can deal with a complaint relating to tracing activity by a debt collector if:

  • the tracing is intended to help collect a regulated consumer-credit or consumer-hire debt; and
  • after carrying out the tracing activity, the debt collector goes on to request repayment of the debt.

From 1 April 2014, tracing agents who undertake no other financial activity (such as requesting repayment of the debt) will be exempt from regulation and will not require FCA authorisation.

did the event complained about happen on or after 6 April 2007?

We are able to look at complaints about events that happened from 6 April 2007 – the date consumer credit businesses came under our jurisdiction. Our jurisdiction isn’t retrospective, so we can’t look at complaints about events that happened before that date.

It is the date of the event being complained about that is important – not the date that the credit or hire agreement was entered into.

which business should the complaint properly be registered against with us?

It may sometimes be appropriate to register a complaint against the lender or hirer, rather than the debt collector who is working for them and is asking the consumer to pay.

This might be the case, for example, where the complaint is about something which was the responsibility of the lender - such as the sale of payment protection insurance (PPI) or application of late-payment charges.

our general approach

When we deal with complaints about debt collectors, we take account of the relevant rules and guidance produced by the regulator, as well as any relevant law and industry good practice, where appropriate. We will always consider the overall facts and circumstances of the complaint – so we arrive at a fair outcome for that particular situation.

Much of the OFT’s guidance is now found in the FCA’s Consumer Credit Sourcebook (CONC) for businesses authorised on or after 1 April 2014.
Although we look at each case individually, we do find some issues come up frequently in the cases we receive. This section explains the approach we generally take.

Although we look at each case individually, we do find some issues come up frequently in the cases we receive. This section explains the approach we generally take.

when the consumer says they're not the person who owes the debt

If the consumer says the wrong person is being asked to pay the debt – for example, a family member – or if there has been a "mis-trace" by the debt collector, we can deal with a complaint from the person who is being asked to pay.

A "mis-trace" is where a debt collector has contacted an unconnected person about paying the debt. In the cases that we see, this is often someone with the same (or a very similar) name as the actual borrower or hirer, or someone who now lives at a previous address of the borrower or hirer.

We would ask a debt collector to provide evidence to show that they are seeking repayment from the correct person. It would not be enough to say, for example, that the person has the same name as the borrower or hirer, or even the same name and date of birth. We would look for some convincing reason to link the person to the debt.

Once we’ve considered the evidence from both sides, we will decide – on the balance of probabilities – whether we think the consumer is the person that owes the debt.

Some of the cases we see involve consumers who became aware that they were being pursued for a debt through messages the debt collector left with neighbours. We can deal with a complaint from anyone who debt collectors have requested payment from. In this situation we could deal with a complaint from the “traced” consumer who the message was for – but not usually from the neighbours who had been asked to relay the message (unless the neighbour had been asked or pressured in some way by the debt collector to repay the debt).

It can be extremely stressful to be wrongly pursued for a debt. Where we decide that a debt collector has wrongly pursued a consumer for payment of a debt they don’t owe, then we will generally award compensation to reflect any distress or inconvenience that the consumer has been caused by the debt collector's mistake. The amount of the award would be depend on the particular facts of the case.

when the consumer doesn't agree with the way the debt has been calculated

We often receive complaints where the amount of the debt is in dispute – for example, where the consumer says that:

  • some of the payments they’ve made have not been properly taken into account;
  • the debt collector hasn’t honoured a concessionary settlement figure that had previously been agreed; or
  • the debt has been made larger by unexpected interest or charges.

We will usually ask the debt collector to provide evidence to show the amount that is actually owed. If the debt collector relied on a figure they were given by the lender or hirer, then we will normally expect the debt collector to ask the lender or hirer for the necessary breakdown of the figure to support their case. The debt collector will usually already have had to ask for that to consider the consumer's complaint before the matter was brought to us.

If a lender or hire business has previously agreed a reduced settlement with the consumer, we would not normally expect it subsequently to instruct a debt collector to recover the full balance. We would also not expect a debt collector to attempt to recover the larger amount once they had been shown evidence of the settlement agreement.

when the consumer believes the debt collector behaved unfairly

Many of the complaints we receive about debt collecting are about the approach the debt collector has taken in their communications with the consumer – or how they have reacted to the consumer's repayment proposals.

For example, the consumer may say that the debt collector has been over-zealous in the number or tone of its communications - perhaps saying that the debt-collector has harassed them.  Or the consumer may say that the debt collector has rejected their repayment proposals out of hand, or is unwilling to be flexible.

When we consider whether a debt collector has behaved fairly, we will look carefully at the communication there has been between the consumer and the debt collector. That might include looking at, for example, correspondence, recordings or logs of telephone calls, and notes of visits.

We will consider whether both the consumer and the consumer have been willing to engage with each other in a reasonable way to discuss repaying the debt. For example, it might not be constructive for the debt collector to insist that the debt be repaid in full immediately – or for the consumer to refuse to make any payment at all.

when debts are sold

It isn’t unusual for lenders to "sell" a consumer credit debt on to another lender – or to the business that has been trying to collect the debt on their behalf. The name sometimes given to this process is assignment.

Consumers are entitled to be told when their debt is assigned. But in some of the cases we see, the situation hasn’t been clearly explained to the consumer – leading to confusion and problems.

In general terms, the new owner of the debt takes over the same rights and responsibilities as the original owner had - and this is reflected in the way that we will deal with complaints that are brought to us by consumers whose debts have been sold.

For example, we would expect the lender to provide the same quality of evidence to support their case - whether they were the original lender, or one who had later been assigned the debt.

is the debt enforceable?

Consumers (or their representatives) sometimes tell us that a debt can’t be legally enforced – because, for example:

  • there are mistakes in the credit or hire agreement; or
  • the debt collector has not been able to produce a "true" copy of the signed credit or hire agreement.

The consumer may seek a declaration from us that the debt is legally unenforceable. Although we will decide what we think is fair and reasonable in the individual circumstances, we have no power to declare an agreement as legally enforceable or otherwise. This is normally for a Court to decide.

redress

We are often able to settle complaints against debt collectors informally. If we’ve found that the debt collector has done something wrong, this may involve a payment of compensation for the distress and inconvenience caused to the consumer.

In some cases, the consumer hopes to have their debt written off in settlement of their complaint of unfair behaviour by the debt collector. Or they think that they can’t be awarded more than the amount of the debt.

But writing off the debt isn’t necessarily an appropriate outcome. It is more often the case that we recommend a suitable, fair amount of compensation - in the light of what has happened, and the actual effect on the consumer. So, compensation will not necessarily mirror the amount of the debt; it could be less, or it could be more.

Sometimes, we will decide that the compensation should be used to reduce the consumer's debt. In other cases, we will decide that it should be paid direct to the consumer. We will decide based on what we this is more appropriate for that case.

Not every settlement will involve a payment of compensation. We might, for example, direct the debt collector to accept a reasonable offer of payment made by the consumer.

help for businesses and consumer advisers

contact our technical advice desk on 020 7964 1400

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  • The law requires us to decide each case on the basis of our existing powers and what is fair in the circumstances of that particular case.
    We take into account the law, regulators' rules and guidance, relevant codes and good industry practice at the relevant time.
    We do not have power to make rules for financial businesses.
    Our current approach may develop in the light of circumstances disclosed by further cases we receive.
    We may decide that fairness requires a different approach in a particular case.