Those involved in recovering consumer credit debt should all be aware of the OFT’s updated guidance on debt collection (published 19 October 2011).
The guidance sets out the overarching principles of fairness which must be applied (Chapter 2) and goes on in Chapter 3 to set out examples of what might constitute unfair or improper business practices. Chapter 4 sets out what the OFT can do in the event that it considers that a business is falling short of the guidelines – from imposing “requirements” on the business (and a fine of up to £50k for failure to implement a requirement) to revoking or restricting a licence.
Since the guidelines were issued on 19 October there have been a number of reports in the press. In an article in the Journal Online, on 18 November Mike Dailly of Govan Law Centre claimed that certain solicitors were ignoring the guidance. He cited an example where a solicitor acting on behalf of an English debt purchasing company had initially accepted £5 per week from a debtor who was in receipt of incapacity benefit (towards a debt of £810) but then sought payment in full once they had registered an Inhibition. He alleged that the company and its solicitors were engaged in “aggressive, oppressive and unfair practices.”
In another case, a company called Nine Regions Limited (NRL) had its appeal against the OFT’s removal of their Consumer Credit Licence struck out. During the appeal hearing it had emerged that:-
- Nine Regions sent out thousands of letters to debtors in the name of “Adams, Spence & Philips (Legal Services Limited)” (“ASP”), falsely threatening court action.
- The letters gave the false impression that ASP was a firm of solicitors.
- ASP had in fact no employees
- Deceptive practices included employees of NRL calling customers pretending to be employees of ASP.
Given the facts it is perhaps unsurprising NRL’s licence was revoked. The OFT’s guidance is however far-reaching and it cites examples of unfair practices which are perhaps not as clear cut as the NRL example. These include:-
- Stating or implying that a particular course of action will ensue when it is not possible to know whether such action would be permissible – as an example of that, stating that enforcement proceedings will ensue before court judgement has been obtained.
- Threatening enforcement action through the courts to pressurise debtors in financial difficulties to pay more than they can reasonably afford.
These are just two of many examples given of potentially unfair/improper business practices. The guidance is far reaching and failure to adhere to it has potentially serious consequences for a licence holder. Now is probably a good time for businesses to renew its processes, standard letters and ensure that staff are aware of and adhere to the guidelines.