OFT warns debt sector
about tracing tactics requirements imposed on debt collection company
OFFICE OF FAIR
TRADING News Release (58/09) issued by COI News Distribution Service
on 15 May 2009
The OFT is warning
the debt collection and tracing sector that using neighbours to
pass on messages to trace subjects is an unacceptable practice and
should be ceased immediately.
It is concerned that some businesses are breaching the spirit of
the OFT debt collection guidance by using this trace method, which
has the potential to reveal to neighbours that individuals are
being pursued for payment of debts.
The OFT is calling on businesses in the sector to take positive
steps to address these concerns. If businesses continue to use
these tactics, the OFT will look to take swift enforcement action.
The OFT has imposed requirements on one 'trace and
collect' company, Link Financial Limited (Link), to confirm
that it will no longer engage in this practice.
Following an application by Link to renew its existing consumer
credit licence, the OFT, working alongside Lambeth Trading
Standards, reviewed Link's business practices and raised
concerns about the use of this trace method.
Link agreed to stop using the practice and, as allowed under the
Consumer Credit Act 1974, made specific proposals which addressed
the OFT's concerns. As a result, the OFT has imposed
requirements which state that Link must not in future use
neighbours to pass on messages to trace subjects.
Nigel Cates, OFT Deputy Director for Consumer Credit,
said:
'Using neighbours to pass on messages to trace
subjects is an unacceptable practice that contravenes our debt
collection guidance. It has the potential, whether unintentional
or not, to lead to the disclosure of private financial affairs and
to cause distress and embarrassment, and we have made this clear
in discussions with the Credit Services Association.
'We are pleased that Link has acted responsibly and taken
positive steps to change its policies and procedures.
'If other businesses continue to engage in similar practices
we will not hesitate to use our licensing and enforcement powers.'
NOTES
1. The Consumer Credit Act 1974 (the Act) requires debt
collectors, businesses that offer goods or services on credit
and/or are involved in activities relating to credit or hire, to
be licensed by the OFT.
2. In 2003 the OFT issued the debt collection guidance (updated
December 2006) which sets out minimum standards for those
intending to collect debts. This guidance is intended to set out
the type of behaviour the OFT considers to fall within the
category of unfair business practices which will call into
question fitness to retain or be given a licence. It is expected
that applicants and licence holders will abide by the spirit as
well as the letter of this guidance.
3. Section 2.6.j of the OFT's debt collection guidance makes
clear that that the OFT considers that acting in a way likely to
be publicly embarrassing to the debtor is an unfair business practice.
4. Following implementation of the OFT's new powers under
the Consumer Credit Act 2006 on 6 April 2008, where the OFT is
dissatisfied with any matter in connection with a business, a
proposal to carry on a business or any other conduct by a
licensee, associate or former associate, the OFT may impose
'requirements' on the licensed business. Requirements
may require a business to do or not to do (or to cease doing)
anything specified for the purposes connected with addressing the
OFT's dissatisfaction, or securing that matters of the same
or a similar kind do not arise.
5. Failure to comply with a requirement could lead to a fine of
up to £50,000 and/or be grounds for revocation of a consumer
credit licence.
6. Two different processes exist for imposition of requirements.
One is where an adjudicating officer issues a notice to the trader
that the OFT is minded to impose requirements to address
dissatisfaction. The trader is then given the opportunity to make
representations to the adjudicating officer. The adjudicating
officer makes a determination and the trader has the right of
appeal against the determination to the Consumer Credit Appeals
Tribunal. Alternatively, a business may offer a proposal to
address the OFT's dissatisfaction pursuant to section 33D(4)
of the Act. In these circumstances the OFT is not required to
issue a notice that it is minded to impose requirements if the
proposed determination is in the same terms as the proposal made
by the business.
7. The fact that requirements have been imposed on Link appears
on the consumer credit register. A copy of the requirements
imposed can be downloaded here http://www.oft.gov.uk/shared_oft/press_release_attachments/Link-requirements.pdf.
8. We will monitor Link's compliance with the requirements.
Any complaints about non-compliance should be sent to:
Enquiries
Office of Fair Trading
Fleetbank House
2-6
Salisbury Square
London
EC4Y 8JX
Enquiries@oft.gsi.gov.uk
9. For advice on dealing with debt, see Directgov at http://www.direct.gov.uk/en/campaigns/RealHelpNow/index.htm
or visit your local Citizens Advice bureau.