OFT warns debt sector about tracing tactics - Requirements imposed on Link Financial

Requirements imposed on debt collection company

58/09 15 May 2009

The OFT is warning the debt collection and tracing sector that using neighbours to pass on messages to trace subjects is an unacceptable practice and should be ceased immediately.

It is concerned that some businesses are breaching the spirit of the OFT debt collection guidance by using this trace method, which has the potential to reveal to neighbours that individuals are being pursued for payment of debts.

The OFT is calling on businesses in the sector to take positive steps to address these concerns. If businesses continue to use these tactics, the OFT will look to take swift enforcement action.

The OFT has imposed requirements on one 'trace and collect' company, Link Financial Limited (Link), to confirm that it will no longer engage in this practice.

Following an application by Link to renew its existing consumer credit licence, the OFT, working alongside Lambeth Trading Standards, reviewed Link's business practices and raised concerns about the use of this trace method.

Link agreed to stop using the practice and, as allowed under the Consumer Credit Act 1974, made specific proposals which addressed the OFT's concerns. As a result, the OFT has imposed requirements which state that Link must not in future use neighbours to pass on messages to trace subjects.

Nigel Cates, OFT Deputy Director for Consumer Credit, said:

'Using neighbours to pass on messages to trace subjects is an unacceptable practice that contravenes our debt collection guidance. It has the potential, whether unintentional or not, to lead to the disclosure of private financial affairs and to cause distress and embarrassment, and we have made this clear in discussions with the Credit Services Association.

'We are pleased that Link has acted responsibly and taken positive steps to change its policies and procedures.

'If other businesses continue to engage in similar practices we will not hesitate to use our licensing and enforcement powers.'

NOTES

1. The Consumer Credit Act 1974 (the Act) requires debt collectors, businesses that offer goods or services on credit and/or are involved in activities relating to credit or hire, to be licensed by the OFT.

2. In 2003 the OFT issued the debt collection guidance (updated December 2006) which sets out minimum standards for those intending to collect debts. This guidance is intended to set out the type of behaviour the OFT considers to fall within the category of unfair business practices which will call into question fitness to retain or be given a licence. It is expected that applicants and licence holders will abide by the spirit as well as the letter of this guidance.

3. Section 2.6.j of the OFT's debt collection guidance makes clear that that the OFT considers that acting in a way likely to be publicly embarrassing to the debtor is an unfair business practice.

4. Following implementation of the OFT's new powers under the Consumer Credit Act 2006 on 6 April 2008, where the OFT is dissatisfied with any matter in connection with a business, a proposal to carry on a business or any other conduct by a licensee, associate or former associate, the OFT may impose 'requirements' on the licensed business. Requirements may require a business to do or not to do (or to cease doing) anything specified for the purposes connected with addressing the OFT's dissatisfaction, or securing that matters of the same or a similar kind do not arise.

5. Failure to comply with a requirement could lead to a fine of up to £50,000 and/or be grounds for revocation of a consumer credit licence.

6. Two different processes exist for imposition of requirements. One is where an adjudicating officer issues a notice to the trader that the OFT is minded to impose requirements to address dissatisfaction. The trader is then given the opportunity to make representations to the adjudicating officer. The adjudicating officer makes a determination and the trader has the right of appeal against the determination to the Consumer Credit Appeals Tribunal. Alternatively, a business may offer a proposal to address the OFT's dissatisfaction pursuant to section 33D(4) of the Act. In these circumstances the OFT is not required to issue a notice that it is minded to impose requirements if the proposed determination is in the same terms as the proposal made by the business.

7. The fact that requirements have been imposed on Link appears on the consumer credit register. Download a copy of the requirements imposed (pdf 45 kb). We will monitor Link's compliance with the requirements. Any complaints about non-compliance should be sent to: