Can a Lender repay a 3rd party debt recovery agency?

fgilgal

First time using this so apologies if I don't do this v well!


Egg have admitted mis-selling a PPI policy on a loan I had. They sold the loan debt on back in 2010 to a 3rd party debt recovery agency & I have since had an agreement directly with them.


Egg have stipulated that they will apportion approx. 1/3 of the money to the debt recovery agency & re pay me the rest directly. If Egg sold the debt on then are they allowed to do this?
Thank you for your help.
Fgilgal

magpiecottage

It would depend on the terms of their contracts with you and with the debt recovery firm.

[Deleted User]

There is often a direct link between these debt recovery firms and the Banks which use them.
If Egg have already stipulated that they propose to offset a third of your redress then I doubt very much they have made a mistake, nor will they be acting illegally. See here;
http://www.moneysavingexpert.com/banking/setting-off

Placida

You might find this FOS PPI resource useful. It is in the Publications section of their website.

How does the ombudsman approach redress where a PPI policy has been mis-sold?
http://www.financial-ombudsman.org.uk/publications/technical_notes/ppi/redress.html

Scroll down to:
'Where the business has “written off” or “sold on” the consumer’s debt'

The FOS has; in fact, where a debt has been sold to a third party directed a financial business to pay redress direct to the customer as the customer no longer owes any money to the original lender.

Although the debt is still outstanding, the contract is now between the customer and the third party that owns it.

The lender no longer has any remaining interest in this. However, the lender still has a duty to provide compensation for the mis-sale of PPI and pay it directly to the customer

“Where a business is the contractual owner of a debt, a customer continues to owe money to it – so it may not be unreasonable to offset any PPI compensation due against any arrears owing on the account associated with this. But in cases where a debt has been sold to a third party the consumer no longer owes any money to it”


Hope this helps

dunstonh

If Egg sold the debt on then are they allowed to do this?

They key is in the commercial relationship between the recovery agency and the lender. Many people use the term sold when it isnt. Indeed, some lenders use it incorrectly as well (where they may employ a third party company for collections but the debt is still within the group).

If it was actually sold on and the lender cannot buy the debt back, then the FOS tends to side with the consumer. If the recovery company is just acting for the lender or the lender can transfer the debt back to them, then the FOS tend to side with the lender. Placida has posted a link that explains this.

[Deleted User]

dunstonh wrote: »

They key is in the commercial relationship between the recovery agency and the lender.

Yes, I pointed this out already above. The question then is would the Bank seek to offset in the first place if they didn't already have the "commercial relationship" you mention? In more meaningful terms for the OP, is it likely that approaching FOS in this particular instance will lead to them overturning the Bank's stated intention to offset?

dunstonh

The question then is would the Bank seek to offset in the first place if they didn't already have the "commercial relationship" you mention?

It is interpretation of the commercial agreement. You can find examples on the FOS site that go both ways.
Here are a couple where the lender lost:
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=18976
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=18213

here are a couple where they won
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=17961
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=12244

The general trend seems to be that the owner of the debt is the key thing and whether it can be bought back or not. If it is sold to a third party and has no ability to come back to the original lender then the FOS seem to go with the borrower. However, if it hasnt been sold and lender remains the owner but the third party is just doing the work for them or it has been sold but with the ability to buy back then the FOS will typically go with the lender.

Financial services is full of opinions on interpretation as so many of the rules are not actually rules but guidelines. And those guidelines are written in a way that is open to interpretation. A borrower, lender and the FOS may all have different views of the same of the same guideline.

Laraine31

Hello all

I wonder if you can help. In October 2012 I successfully reclaimed PPI from Egg. I had defaulted on a loan from them in 2007 which has been sold on numerous times, it is obviously now nearly six years. However my settlement was a figure to me and then nearly £5,000 which they said would be set against the loan and paid to the debt company. However, this money has never appeared against the loan and I am having no luck tracking it down and it's been over a year! I'm still paying an amount against the debt every month, I have tried emailing, the debt company says that they have no record of it and it's not their problem, they can't find out!!! Please help

[Deleted User]

Laraine31 wrote: »

Please help

Answered on your other thread..

Brokerwise

dunstonh wrote: »

It is interpretation of the commercial agreement. You can find examples on the FOS site that go both ways.
Here are a couple where the lender lost:
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=18976
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=18213

here are a couple where they won
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=17961
http://www.ombudsman-decisions.org.uk/viewPDF.aspx?FileID=12244

The general trend seems to be that the owner of the debt is the key thing and whether it can be bought back or not. If it is sold to a third party and has no ability to come back to the original lender then the FOS seem to go with the borrower. However, if it hasnt been sold and lender remains the owner but the third party is just doing the work for them or it has been sold but with the ability to buy back then the FOS will typically go with the lender.

Financial services is full of opinions on interpretation as so many of the rules are not actually rules but guidelines. And those guidelines are written in a way that is open to interpretation. A borrower, lender and the FOS may all have different views of the same of the same guideline.

For what it is worth my opinion if a customer has built up arrears on any form of finance they should offset any money they receive via claims against this debt - you should not be able to have your cake and eat it regardless of where the debt now lies