OFT Debt collection guidance2011 update

Office of Fair TradingGordon Ramsay – Head of Debt Collection

Jane Shepherd – Principal Debt Policy Officer

Debt collection guidance (DCG) Regulatory/Market changes since 2006: enhanced CCA

powers, growth of debt sale/purchase Similar ‘user friendly’ format to current version but

more consistency with recent OFT guidance Debt collection ‘branding’ remains Section on unfair or improper business practices

clarified and updated Consultation – 10 March - 2 June

Structure and content Foreword – sets out aim of guidance & gives overview of

layout highlighting changes from previous version Introduction – fitness test, scope/purpose of guidance Overarching principles of fair business practice Unfair or improper business practices Other relevant guidance and legislation Regulatory compliance and enforcement Annexes providing more detail

Scope All consumer credit/hire debt collection/recovery

activity All standard licence holders, applicants and persons

covered by a group licence (eg law firms) Businesses engaged in recovery of own debt, or debt of

others Licensed businesses assisting debt recovery process (eg

tracing) Licence holders’ responsibilities for agents/third parties

Purpose of guidance Sets out standards OFT expects businesses to

adhere to by identifying principles of fair business practice and types of behaviour falling within category of unfair or improper business practices

Provides basis against which OFT and TS can undertake competence assessments

Overarching principles of fair business practice Transparency Forbearance and consideration towards debtors Proportionality when seeking to recover debts Implementation of clear, effective and appropriate policies

and procedures Flags up principles relevant to different types of unfair or

improper business practices Licence holders’ responsibility for activities of third parties

Unfair or improper business practices Updated to provide additional clarification and examples: Communication False representation of authority/legal position Harassment Deceptive and/or unfair methods Unfair charges Visits Statute barred debts Debt Sale and purchase – new section

Debt sale and purchase - NEW section Inadequate maintenance of data by creditors (eg failing to

update systems or records when it has been established that no debt is owed)

Insufficient/unclear information provided to debtors (eg creditors failing to advise debtors formally the consequences of a debt being ‘written off’)

Deficiencies in exchange of data in support of recovery activity (eg that an appointed representative is acting for the debtor)

‘Sufficient’ Data

3.19 a) creditors failing to ensure that sufficient information held about a borrower in relation to the provision of credit to him is made available to its department/staff involved in debt recovery

3.19 g) creditors passing on inaccurate, out of date, or insufficient account data/debt history to other parties involved in the recovery process

‘Written Off’ debt

3.19 e) when a debt has been 'written off', creditors failing formally to advise[1] debtors of the consequences of such action, for example, whether the debt is extinguished or whether it could be sold on and pursuit of the debt continued by other businesses

[1] The obligation to advise is that of the business and it must be able to show that its systems are such that consumers are not in any way misled or denied information

CommunicationIt is unfair to communicate in whatever form with

consumers in an unclear, inaccurate or misleading manner Standard letters: CSA/DBSG Guidance document Disputes – unfair not to provide information on

outcome of investigations into reasonably queried or disputed debts

Clarity for consumer when payments have been accepted as full and final settlement of a debt

False RepresentationThose contacting debtors must not be deceitful by

misrepresenting their authority and/or the correct legal position Falsely stating action can be taken when legally it cannot

(new examples eg where the creditor has failed to comply with a request to provide information)

Falsely implying or stating that a particular course of action will take place before it is possible to know whether such action would be permissible (eg referring to use of warrant of execution, charging order or attachment of earnings before a court judgment has been obtained)

Physical/psychological harassment

Putting pressure on debtors or third parties is considered to be oppressive Inaccurate data resulting in person being wrongfully pursued

or pursued for incorrect amount Public embarrassment – use of social networking sites, IVM Intimidating debtors in financial difficulties to pay more than

they are able – by using threat of enforcement action through the courts eg charging orders/inhibitions and orders for sale

Other unfair/improper practicesDeceptive and/or unfair methods

When a debt is reasonably queried/disputed, failing to investigate or provide details (including account history, payment schedules and correspondence as appropriate) within a reasonable time

Debt Collection visitsThose visiting debtors must not act in an unclear or threatening manner – not just home visits

Statute barred debtPosition clarified for different jurisdictions

Annexes

What views do you have on the way we have used annexes in this document?

Other questions…?

Is there anything you are surprised to see in the guidance – why?

Is there anything you are surprised not to see – what and why?

Feedback to us ….Our formal consultation exercise closes on 2nd June 2011. We would encourage you to also send us your individual consultation responses in writing: by email: dcguidance-review@oft.gsi.gov.uk by fax: FAO Jane Shepherd - 020 7211 8604 by post: Ms Jane Shepherd, 2C/15, Consumer Credit Group, Office of Fair Trading,

Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX.

The OFT intends to publish a summary of responses to this consultation, which will include a section on feedback obtained from events and workshops.We aim to issue our final guidance and the summary of responses in late summer 2011.