New rules planned for debt collectors

One collection firm contacted a debtor 28 times a day

Debt collectors who use unfair methods to obtain money from debtors are facing a clampdown under measures being drawn up by the Office of Fair Trading (OFT).

It is essential that debt collectors carry out their business fairly. Businesses that fail to do so could lose their credit licence

John Vickers, Director General of Fair Trading

The OFT is proposing fresh guidelines on what constitutes unfair practice in the debt recovery industry and plans to withdraw the credit licences of firms who break the rules.

The OFT wants to stamp out methods such as firms using official-looking documents intended to resemble court summonses to pursue debts.

However, an industry body says the OFT needs to go further than it currently plans.

New measures

Apart from the motor trade, debt collectors are the subject of most licensing complaints received by the OFT.

As a result, the OFT is drawing up the new guidelines which are expected to prohibit firms that:

• Obtain details under false pretences
• Falsely claim a right of entry to seize goods
• Mislead debtors over liability for collection charges
• Refuse to deal with appointed third parties such as the National Association of Citizens Advice Bureaux (NACAB).

It is hoped that new guidelines will curb some of the worst excesses of the debt collection industry.

In one case referred to the OFT, a debt collection agency contacted a debtor 28 times in one day.

We would like to see the government go further to drive the cowboys out

Credit Services Agency spokesperson

On another occasion a debt collection agency threatened to seize a couple's possessions for a debt owed by their son.

"Those in debt can be some of the most vulnerable consumers," said John Vickers, Director General of Fair Trading.

"It is essential that debt collectors carry out their business fairly. Businesses that fail to do so could lose their credit licence."

The guidelines will now be the subject of a 12 week consultation period with industry bodies and consumer groups.

Stopping the Cowboys

However, the Credit Services Agency (CSA), a debt recovery industry body with 160 member firms, has already broken ranks to suggest that the OFT draft guidelines do not go far enough.

"What is needed is best practice being applied to the industry as a whole," a CSA spokesperson told BBC News Online

"If the OFT allows firms to get away with sharp practices then our members will be at a disadvantage.

"We would like to see the government go further to drive the cowboys out."