MSE News: MBNA slammed over unfair debt collection tactics

Credit card lender MBNA has been slapped on the wrists for its poor treatment of customers struggling to make repayments.

The Office of Fair Trading (OFT) has threatened it with a £50,000 fine if the company fails to implement new measures for dealing with those in financial difficulties (see the Debt Problems guide).

An OFT investigation found MBNA's debt collection arm was not always making it clear it would accept token payments from those in the mire.

It also bypassed customers' appointed representatives, such as debt charities and debt management firms, even though its policy allows them to handle enquiries.

MBNA has therefore been ordered, from 1 January, to:

• Make it clearer in letters to customers in financial difficulty that it will accept token payments.
• Only contact customers with appointed representatives if the borrower or third party has given permission; or if no payment has been made and MBNA has tried, but failed, to contact the representative.

Ray Watson, from the OFT, says: "Our investigation found problems with the way MBNA communicates with customers in financial difficulties.

"MBNA has agreed that it will make its debt collection letters clearer and clarify its policies and procedures for dealing with appointed representatives."

REQUIREMENTS IMPOSED BY THE OFFICE OF FAIR TRADING ('OFT') PURSUANT TO SECTION 33A AND SECTION 33D(4) OF THE CONSUMER CREDIT ACT 1974 ('the Act')

REQUIREMENTS RELATING TO:

MBNA Europe Bank Limited (Consumer Credit Licence Number 363167),
registered office address: Stansfield House, Chester Business Park, Chester, Cheshire CH4 9QQ

THE OFT REQUIRES AS FOLLOWS:

That as of the 1 January 2011

1) MBNA Europe Bank Limited shall:

a) maintain its policy that when MBNA Europe Bank Limited has established that a customer is in financial difficulties it accepts the amount that they have demonstrated that they can afford to pay and will improve its confirmation letter ('Confirmation Letter') to make this clearer; and

b) improve the clarity of its Confirmation Letter to advise of the steps that may be taken, including the fact that MBNA Europe Bank Limited sends a notice of impending default at least 30 days before it is registered with the credit reference agencies (if such notice has not already been given).

2) MBNA Europe Bank Limited shall maintain its policy that if a customer has requested all future communications should be made to an appointed representative, including a debt management company, it will deal with the representative and not the customer. Under this policy, from the 1 January 2011, MBNA Europe Bank Limited shall only contact the customer directly in the circumstances described below (which will be communicated to the customer upon the representative's appointment):

a) MBNA Europe Bank Limited may contact the customer directly if:

i) the appointed representative has given permission or informed MBNA Europe Bank Limited that it is no longer acting as the customer's representative

ii) the customer has informed MBNA Europe Bank Limited that he or she wishes MBNA Europe Bank Limited to contact him or her directly, or that the appointed representative is no longer acting for him or her

b) MBNA Europe Bank Limited may also contact the customer directly to confirm whether their representative is still acting if all of the following apply:

i) the expected payment has not been made

ii) MBNA Europe Bank Limited has attempted t o contact the appointed representative at least three times since the expected payment was not made; and

iii) no response has been received from the appointed representative and at least 14 days have passed since the initial attempted contact.

c) MBNA Europe Bank Limited may continue to send directly to customers statements of account and any other communications that MBNA Europe Bank Limited reasonably believes it is obliged to send directly to the customer under applicable law or regulation.

ANY FAILURE TO COMPLY WITH THE ABOVE REQUIREMENTS WILL RENDER MBNA EUROPE BANK LIMITED LIABLE TO FURTHER FORMAL ACTION BY THE OFT. THIS COULD INCLUDE THE IMPOSITION OF FINANCIAL PENALTIES PURSUANT TO SECTION 39A OF THE ACT AND/OR THE REVOCATION OF MBNA EUROPE BANK LIMITED'S CONSUMER CREDIT LICENCE PURSUANT TO SECTION 32 OF THE ACT.

Authorised signatory on behalf of OFT

(Ray Watson - Director of Consumer Credit)