COMPLAINTS about the tactics used by firms employed to recover consumer debts are on the rise, with debtors increasingly reporting harassment and unlawful behaviour.
Debt charities, consumer groups and the Office of Fair Trading (OFT) have all expressed concerns over the methods used by debt agencies.
And more people are having to deal with the firms, as creditors, anxious to recover money owed to them but re
luctant to chase it themselves, increasingly pass their client debts on to the companies.
By the end of 2008, 20 per cent of all client debts had been referred to collection agencies, up from 15 per cent in 2003, according to Citizens Advice Scotland (CAS).
The increase is not due only to creditors being quicker to try to recover their money, but because creditors – especially banks – are sensitive to the bad press that debt collection activities may attract.
As the use of debt recovery firms has grown, so, too, have complaints about them. In the year to 31 March, the Financial Ombudsman Service (FOS) received 2,393 inquiries and complaints from consumers about debt recovery, up from 1,510 the previous year. Those figures look set to be easily surpassed next year, with nearly 800 complaints in only the past three months. In most cases, according to the FOS, inquiries are followed by a call to the company involved from the ombudsman, and issues are quickly resolved.
Complaints to Consumer Direct Scotland about debt collection have followed a similar pattern, with nearly as many so far this year as in the all of 2008.
They range from cases of mistaken identity to threatening behaviour. One CAS client was angry when a debt collection agency sending out intimidating letters with a picture of a dog at the top alongside a statement reading "our bite is worse than our bark". Another told of a debt recovery agency stating that unless a satisfactory agreement was reached, the company would instruct bailiffs to enter the property with the intention of seizing goods to pay for the debt – but bailiff action no longer applies in Scotland.
The OFT has the power to revoke the licence of debt collection agencies found to be acting illegally and has used that power against at least two companies in recent months, with more under investigation. One firm to have attracted OFT attention is 1st Credit, which has been told not to issue bankruptcy warnings where it was unlikely that proceedings would be initiated.
The problems generally arise with companies that are not members of trade groups such as the Credit Services Association (CSA), said Yvonne Gallagher, chief executive of Money Advice Scotland. "The feedback from our advisers is that some agencies are not adhering to the OFT's guidance, but there are others that are members of the CSA who are acting within the confines of the guidance."
The good news is that if you feel you are being pressurised or harassed by debt collectors, there are steps you can take to address the situation.
Know your rights... and theirs: All debt collectors must be licensed by the OFT. To find out if a firm is permitted to carry out debt recovery, call the watchdog on 08457 22 44 99.
Under the OFT's guidelines, debt collectors must contact debtors only at reasonable times and at reasonable intervals; must not pressurise debtors to pay in full, in unreasonably large instalments, or increase payments when they are unable to do so; must not make threatening statemen
ts or gestures or disclose or threaten to disclose debt details to third parties unless legally entitled to do so.
The CSA has a code of practice to which members must adhere. See www.csa-uk.com or call 0191-286 5656 to request a copy.
Get advice: If you are being plagued by debt collectors, you clearly are having financial difficulties, says Eileen Blackburn, a partner at French Duncan Chartered Accountants. "The first tip is to be aware of your rights, and you can get a good view on these by contacting a reputable professional adviser.
"The Citizens Advice Bureau or a licensed insolvency practitioner will give you an initial consultation for free and, once you are clear on your rights, you should have much more confidence in addressing the demands of debt collectors," she added.
Money Advice Scotland also has advisers on hand to take up problems with the companies concerned, particularly where they have encountered issues with the same firm before.
Similarly, Consumer Direct Scotland has urged anyone who feels they have been unfairly treated by a trader to contact it for advice. In some instances, the matter may be referred to local trading standards officials, who may be able to investigate unfair business practices further. However, be wary of debt management companies that advertise in the media, especially those wanting an upfront payment.
Complain: If you suspect a debt collector has breached the guidelines to which they must adhere, first contact the collector or the relevant creditor. Try to gather evidence, including the time you were visited or called and what was said, and keep any letters. Write to the creditor saying you are aware of the Debt Collection Guidelines and believe they are in breach of these, and ask it to stop what it is doing.
If this fails, contact the FOS on 0845 080 1800. It will then contact the company directl
y and, if no response is forthcoming after eight weeks, formal proceedings will be initiated.
You can also make a formal complaint to the CSA – contact it on 0191-286 5656 or at ww.csa-uk.com – provided the company with which you are dealing is a member.
HERE TO HELP• Consumer Direct Scotland: www.consumer direct.gov.uk or call 08454 04 05 06.
• Citizens Advice Scotland: www.cas.org.uk or your local bureau
• www.nationaldebtline. co.uk/scotland or call 0808 808 4000
• www.moneyadvice scotland.org.uk or call 0141-572 0237
• Financial Ombudsman Service: www.financial-ombudsman.org.uk or call 0845 080 1800
