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Debt collectors warned

OFT publishes guidance on unfair debt collection practices

PN 97/03     14 July 2003

Debt collectors are being told to deal fairly with debtors or face losing their consumer credit licence, with new guidance published by the OFT today.

Download Debt collection guidance (pdf file 337 kb). 

The guidance is aimed at all consumer credit licence holders and applicants and applies to the collection of debt once an account is in default. It sets out the types of behaviour that the OFT considers to be unfair and which could call into question fitness to hold a licence.  Examples of the types of behaviour covered include:

• failing to investigate or provide proper details/records when a debt is queried or disputed
• failing to deal with appointed third parties such as Citizen's Advice Bureaux or independent advice centres
• pursuing third parties for payment when they are not liable
• falsely implying or claiming authority – such as claiming to be working on court authority
• contacting debtors at unreasonable times and/or intervals
• claiming a right of entry when no court order has been obtained
• misleading debtors by the use of official-looking documents such as letters made to resemble court claims.

The guidance also makes it clear that lenders must not ignore the unfair practices of debt collectors acting on their behalf, whether in-house or external. Lenders should take care in the selection of third parties, investigate complaints and take action where appropriate. Failure to do so will call their own fitness to hold a licence into question.

The debt collection sector attracts the largest number of licensing complaints to the OFT. The guidance will enable the OFT to take speedier action against unfit licence holders and it should therefore help avoid problems arising in the first place.

Welcoming the new guidance John Vickers, OFT Chairman, said:

'Debt problems can affect some of the most vulnerable consumers. Debt collectors must carry out their business fairly and openly. The new guidance explains what is expected of debt collectors and sets out the sort of behaviour that could lead to action against licence holders.'

NOTES

1. Under the Consumer Credit Act 1974, businesses that offer consumer credit or hire must have a consumer credit licence. The OFT has a duty to protect the interests of consumers by monitoring the fitness of applicants and licence holders.

2. In considering fitness the OFT will take into account a number of factors including:

• any offence or conviction of violence or dishonesty carried out by the business or anyone involved in running the business
• failure to comply with the provisions of the Consumer Credit Act or other consumer protection legislation
• consumer complaints and evidence of unfair business practices
• evidence of discrimination on grounds of sex, colour, race or ethnic/national origin.

3. In January 2000 OFT issued a Debt Collection Practices Note (pdf file 35 kb) covering charging.

4. The OFT issued general guidance for consumer credit licence holders and applicants in February 2001 (see PN 06/01). (This included provisions on debt collection). 

5. The OFT published draft guidance for debt collectors on 28 November 2002 which was open to consultation (see PN 82/02).

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