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ombudsman news

issue 30

August 2003

ask ombudsman news -
your questions answered

dealing with debt

As an adviser in an inner city debt support unit, I see many clients whose circumstances have led to them getting into difficulties with their bank. I know that industry codes, such as the Banking Code and the Mortgage Code, require banks and lenders to deal "sympathetically and positively" with customers in financial difficulty. But many of the clients I see don't feel they have been dealt with at all sympathetically or positively. and when they come to me they are not only anxious about mounting debts but also very frustrated with the apparent lack of understanding on the part of their bank or lender. If they feel unhappy about the way they were treated, can they come to you- If they can, how do you look at these sorts of complaints-

Yes, if customers have already made a complaint to the financial firm about the way they feel they were treated, but remain dissatisfied, then they can come to us.

We look at the individual circumstances of the case, including what the firm is alleged to have done wrong and the effect this has had on the customer, (such as whether there has been any financial loss or whether the customer suffered distress and/or inconvenience). We apply what we call a "fair and reasonable" basis for our decisions. In deciding what is "fair and reasonable" we will take into account:

  • the relevant law;
  • regulators' rules and guidance and standards;
  • relevant codes of practice; and, where appropriate,
  • what we consider to have been good industry practice at the relevant time.

Where codes of practice are relevant to the complaint, we will come to a view on whether the firm acted in line with the letter and spirit of these codes. So in the types of case you mention, we would expect the firm to act "sympathetically and positively". This does not mean that we expect the firm to write off the debt. Broadly it should:

  • Contact the customer to discuss the difficulties.
  • Make straightforward information available, written in plain English, about how the firm deals with customers in financial difficulty.
  • Discuss and agree with the customer a plan of action for resolving the difficulties, and give the customer a written copy of the plan.
  • Refer customers who require specialist assistance to a specialist team within the firm.
  • Not subject customers to undue pressure or harassment when discussing their problems.

We would, of course, also expect a customer to be open and cooperative with the firm.

These and other points are covered by the Guidance on the Banking Code March 2003.

The Office of Fair Trading has recently published further guidance on debt recovery procedures.

Walter Merricks, chief ombudsman

ombudsman news issue 30 [PDF format]

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.