OFT announces review of debt collectors

The Office of Fair Trading has launched a review of debt collectors to ascertain whether they are adhering to the watchdog's guidance, which was issued in July 2003.

The guidance bans unfair business practices, such as misleading communication with customers, threatening behaviour and the levying of unfair charges.

Since the introduction of the guidance, the OFT has monitored compliance on a case by case basis, usually by responding to complaints and taking appropriate action, such as giving warnings or revoking licenses.

Since July 2003, 79 advisory or warning letters have been issued and 12 licenses have been refused or revoked.

The OFT said that the most common breaches of the guidance were:

• pressurising debtors to pay in full, in large instalments or increasing payments when the debtor cannot meet the demand;
• refusing to deal with appointed or authorised third parties, such as independent advice centres or money advisors;
• failing to investigate and/or provide details as appropriate when a debt is queried or disputed, possibly resulting in debtors being wrongly pursued;
• disclosing or threatening to disclose debt details to third parties without being legally entitled to do so.

As part of the review the OFT will issue a questionnaire to current debt collection license holders, including creditors, Trading Standards and free/independent advice agencies. A form will also be available for consumers who wish to make a complaint against a license holder or applicant.

Penny Boys, OFT Executive Director, said: “Our guidance sets out practices we view as unfair and relevant to fitness of those holding consumer credit licenses. We have some evidence of non-compliance and also examples of changes in behaviour as a result of the guidance. This review will give us a clearer picture of compliance levels across the country. The compliance review will also raise awareness of the guidance amongst those in debt, who are some of the most vulnerable consumers. If they are experiencing unfair treatment we want to know so that we can tackle that unfair conduct.”

A report on the review is due to be published in Spring 2006.

(KMcA/SP)