An interesting article by Jenny Little (“Moneywise”, Nov 2010) reminds me of a problem that can cause great misery for personal debtors. The Office of Fair Trading (OFT) has a ruling that prohibits harassment of debtors. Moreover the OFT clarifies what constitutes harassment by publishing guidelines; however, many lenders ignore them.

According to the article, in some cases lenders have even claimed to be unaware of the guidelines, though it’s the OFT that issues those same lenders with their consumer credit licences.

To see the article, go to: http://www.moneywise.co.uk/cards-loans/credit-cards/article/2010/10/25/credit-card-demons-revealed

Little says that “growing numbers of people struggling with credit card payments complain of creditors bullying them with menacing letters, doorstep visits and threats of court action or repossession.

“In public, credit card and debt collection firms pay lip service to official guidelines protecting consumers, but staff are given financial incentives to recover debt, provoking the sort of harassment that makes millions of debtors’ lives a misery.”

Official guidelines

OFT guidelines require lenders to negotiate with third parties, e.g. debt management companies, and say that debt collectors must give advance notice of visits. Debtors can also request not to be contacted at work.

Debt collection firms pretending to be bailiffs, or falsely threatening criminal proceedings, also risk being fined or having their credit licence revoked.

The guidelines in full:

Physical/psychological harassment: putting pressure on debtors or third parties is considered to be oppressive. Examples of unfair practices are as follows:

• contacting debtors at unreasonable times and at unreasonable intervals
• pressurising debtors to sell property, to raise funds by further borrowing or to extend their borrowing
• using more than one debt collection business at the same time resulting in repetitive and/or frequent contact by different parties
• not ensuring that an adequate history of the debt is passed on as appropriate resulting in repetitive and/or frequent contact by different parties
• not informing the debtor when their case has been passed on to a different debt collector
• pressurising debtors to pay in full, in unreasonably large instalments, or to increase payments when they are unable to do so
• making threatening statements or gestures or taking actions which suggest harm to debtors
• ignoring and/or disregarding claims that debts have been settled or are disputed and continuing to make unjustified demands for payment
• disclosing or threatening to disclose debt details to third parties unless legally entitled to do so
• acting in a way likely to be publicly embarrassing to the debtor either deliberately or through lack of care, for example, by not putting correspondence in a sealed envelope and putting it through a letterbox, thereby running the risk that it could be read by third parties.

Source: Office of Fair Trading, “Debt collection guidance: final guidance on unfair business practices.”

Lenders ignoring guidelines

But it seems the guidelines carry little weight with the lenders, according to Little. Heather Keates, chief executive of Community Money Advice, says: “Card firms are jittery and increasing interest rates. Creditors now go in hard from the outset.”

Citizens Advice (CAB) gives the example of one client’s recent experience. A 42-year-old single mother, she was struggling to keep up with a £7,000 credit card debt on her £589 take-home pay. She made the minimum payments but, when she defaulted, her bank began to phone her up to six times a day, even at work.
When the CAB intervened, the bank’s representative claimed to know nothing of the OFT guidelines and blamed the repeated calls on an automated system.

Automated dialling systems

Little has found that the use of automated dialling systems is commonplace and can result in customers receiving multiple calls every day. Some people resort to buying an extra pay-as-you-go mobile just to avoid harassment.

Alex MacDermott of Citizens Advice said: “It’s always better to talk to the card provider; otherwise your number will stay in the automated dialler, which will keep ringing. But the tone of some calls can be very threatening.”

Mention of telephone harassment and automated dialling reminds me of my own experience when I was in debt. That’s why I say: “try to avoid talking to creditors by phone. Don’t ignore them; respond to the messages … but in writing. Let all your incoming calls go to voicemail, if you are single-minded enough to do so.”

While some providers employ in-house debt collection, others ‘sell on’ debt to a third party. The Consumer Credit Act requires that they first issue a default notice to customers who have skipped payments to inform them which company has taken on the debt but in my experience this rarely happens.

The OFT has criticised debt collection agencies for “making frequent phone calls, threatening court action and not describing the process correctly”, and has also concluded that many default charges are unlawful. It says that £12 is the maximum that anyone should be penalised for missing a payment.
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What to do

As I say again and again in my book: get help, especially if you are being harassed. Apart from the three major national debt advice charities Citizens Advice (CAB), Consumer Credit Counselling Service (CCCS) and National Debtline, there are also Community Money Advice and Debtors Anonymous, as well as Consumer Action Group, which is an online support network. All of these are easily located online. There are also local advice centres, too numerous to mention.

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