UK Regulator Releases Report on Debt Collection Compliance

The U.K.’s Office of Fair Trading has today published the findings of a review into how guidance to debt collectors has changed behaviour within the sector and raised awareness. The OFT’s guidance on debt collection, issued in July 2003, sets out minimum standards for debt collection by those holding consumer credit licenses.

The OFT found that:

• the guidance is a success in terms of content
• awareness has increased among collectors of debts, individual debtors and consumer advisors
• there have been positive changes in industry behaviour, and
• there is more to be done in improving levels of compliance.

Consumer advice organisations said that the most serious practices, such as threats of violence to debtors, had reduced. The main complaints by consumers remain threatening statements from companies, being contacted at unreasonable times and firms failing to investigate disputed debts. A common complaint theme is threatening court action and not describing the process correctly.

Respondents to the review found the guidance clear and easy to use. Consumer advisors said that they and their clients had found the guidance to be a useful tool for challenging unfair behaviour by creditors and debt collectors. Representatives of local authority Trading Standards Services shared this view.

Positive changes in industry behaviour include:

• creation of dedicated complaint handling units
• revision of standard letters where they had the potential to mislead or be perceived as threatening, and
• cessation of anonymous telemessages to contact debtors.

The OFT’s review found that 17 per cent of all those licensed to collect debts have attracted complaints from customers between April 2004 and August 2006. The OFT has taken action against those collecting debts in 101 cases.

Alan Williams, Senior Director of Markets and Projects at the OFT, said:

‘We are pleased with the praise for our guidance and welcome the positive measures taken by the industry to reduce unfair practices but more still needs to be done to improve levels of compliance around debt collection. If companies engage in unfair debt collection practices we will continue to take firm enforcement measures to stop them. This could involve formal action to refuse or revoke their licence, or warning and advising companies how to change their behaviour. Our aim is to increase consumer welfare in an area where those in debt are already vulnerable.’