Explanations

Received any threatening letters or phone calls recently?

You may be pleasantly surprised to learn that creditors and debt colection agencies do have regulations they must abide by, or lose the OFT licence they need to trade.

DEBT COLLECTION PRACTICES

The OFT published a guidance note [OFT298] in January 2000 outlining the Director General’s views on misleading letters and collection charges in relation to licensing under the Consumer Credit Act 1974.

The OFT reminded creditors and debt collection agencies that the issue of documents
·resembling a court summons or other official document
·leading the debtor to believe they come from or have the authority of a court
·otherwise containing false or misleading information intended to obtain payment

- may be criminal offences under the County Courts Act 1984 and/or the Administration of Justice Act 1970.



Any practice liable or intended to mislead the debtor – whether as to the origin or authority of any document or as to any other material matter is likely to be regarded as deceitful or oppressive or otherwise unfair or improper within the meaning of section 25(2)(d) of the Consumer Credit Act 1974, whether the practice is unlawful or not.



It is an offence under Section 135/136 of the County Courts Act 1984 to deliver or cause to be delivered to any person any document
·which, by reason of its form or contents has the false appearance of having been issued under the authority of a county court
·falsely purporting to be a copy of any summons or other process of a county court, knowing it to be false, or to act or profess to act under any pretence of the process or authority of a county court



It is an offence under Section 40(1)(c)/(d) of the Administration of Justice Act 1970 to falsely present
·a document as having some official character which it has not with the object of coercing another person to pay money claimed as a debt due under a contract
·an individual to be authorised in some official capacity to claim or enforce payment



It is an offence under Section 40 of the Administration of Justice Act 1970 and Section 1 of the Malicious Communications Act 1988
·to harass of debtors with a view to obtaining payment including the issue of letters which convey a threat or false information with intent to cause distress or anxiety.



Documents may be in breach of the County Courts Act and/or the Administration of Justice Act even if they do not exactly resemble a court summons or other official document.

Documents may not
·by reason of their form or contents or both, appear to have been issued by or under the authority of a court or other official body.
·mislead as to the nature of the processes involved or the likelihood of legal proceedings.

All statements contained in letters and other documents to consumers must be capable of being substantiated in the event of a complaint.

Debt Collection Charges

There is no legal basis for a creditor or a debt collection agency acting on its behalf to claim collection costs from a debtor unless there is an express provision in the original agreement.

Without such provision, collection charges cannot be demanded as a debt due under the agreement.

If an agency claims the right to recover charges under a separate agreement with the debtor, there must be a binding contact to this effect, with legal consideration (ie benefit) provided to the debtor.

A letter advising the debtor of a liability for certain charges is not such an agreement, regardless of whether it is signed by the debtor.



If an indication of charges payable on default is not included in a credit agreement regulated under The Consumer Credit (Agreements) Regulations 1983,  it is not properly executed and will not be enforceable against the debtor without a court order.



It is likely to be an ‘unfair or improper business practice’ under Section 25(2)(d) of the Consumer Credit Act if
·Creditors or collection agencies fail to ensure that they do NOT recover collection charges in the absence of an express contractual provision entitling them to do so
·Debtors are led or allowed to believe that they are legally liable to pay such charges where this is not the case.
·Any ambiguity in the debtor-creditor agreement as to whether it covers a particular charge, or the permitted amount of the charge is not resolved in favour of the debtor
·collection charges provided for in the credit agreement are levied at an unreasonable amount and/or are disproportionate to the main debt



All these issues will be relevant to questions of fitness to hold a licence under the Consumer Credit Act, whether or not they result in prosecution of the individual(s) or company(ies) concerned.

Under section 25(2) of the Consumer Credit Act the fitness of a licensee can be brought into question by the actions of any of its employees, agents or associates, and section 25(3) defines ‘associate’ for these purposes as including a business associate.



This document has been summarised by the national association of bank + insurance customers (nabic) from the document issued by OFT.  More copies of this document are available from www.LemonAid.net  the original document is available from www.oft.gov.uk


Page last changed 29 April, 2003

Explanations pages give general information on how things (should) work, with appropriate links to facts pages where you can get more information or make a complaint as necessary.

If you are currently being chased hard for payment of a debt, consider using our suggested letter wording.

If you are still put under unreasonable pressure, report the matter to the OFT.

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