UK Warns 13 Firms Over Debt Collection Tactics

The United Kingdom’s Office of Fair Trading (OFT) announced Wednesday that it had issued warnings to 13 different companies – including debt collection agencies and banks – informing them that they need to improve their debt collection practices in the face of rising consumer complaints.

The OFT, roughly the U.K. equivalent of the U.S.’s Federal Trade Commission (FTC), said in a statement that it gave the companies four weeks to address concerns and report back to the regulator. Companies risk losing their consumer credit license if they do not report to the OFT. Additionally, the OFT may impose special requirements on some of the firms after they respond to the warning, with penalties up to US$100,000 for failure to comply.

The OFT did not release the names of the firms, reporting that this was an informal action and that revealing the companies’ names could be a violation of U.K. law. All of the companies that were warned have consumer credit licenses, a requirement in the U.K. to grant credit or collect consumer debt.

A “marked increase in consumer complaints … about debt collection practices” generated the warnings, the OFT said in its release. The regulator ticked off a list of what it considered the most egregious violations underlying the complaints, including chasing consumers that did not owe the debt, failing to properly validate a disputed debt and contacting consumers at “unreasonable times and intervals.”

“It is unacceptable for debt collection businesses to engage in unfair practices and we will continue to take action where we find evidence of this,” David Philpott, OFT Deputy Director of Consumer Credit, said in a statement. “One of our main priorities is to protect consumers who may already be vulnerable as a consequence of serious debt problems.”

The companies were asked to review their policies and procedures for tracing debtors, including keeping client data up to date and maintaining its accuracy. The OFT believes that insufficient accuracy checks carried out on data received from creditor clients and/or from credit reference agencies lie at the heart of many complaints.

The regulator noted that it will be writing to the main trade bodies for creditors and the debt collection industry recommending that they take action to improve the quality of base data used for debt collection in order to improve compliance with the OFT's guidance.

Since the OFT's debt collection guidance was issued in 2003, the agency has revoked nine credit licenses of debt collection agencies ("UK Gov't Agency Revokes License of Collection Agency," March 12, 2007) and issued 137 warning and advisory letters to 120 licensees.