Are solicitors allowed to buy debts from banks that the same solicitors represent?

Queen24053

I have seen posts on this forum about HSBC selling debts to MFDP Ltd, a debt collection entity.

After selling the debt to MFDP Ltd, HSBC has also been instructing borrowers to continue paying their debt through a preferred solicitor, Restons Solicitors.

I have a debt with HSBC which I have been paying through Restons Solicitors. Last month, July 2024, I received a letter from MFDP Ltd that my debt has been sold to MFDP Ltd and that from then on, I should make payments to them (MFDP Ltd)

Because I never received a letter from HSBC that my debt was sold, I wrote to MFDP Ltd telling them that I would ignore their request unless I get notice of this fact in writing from the HSBC.

In response, MFDP Ltd sent me an unsigned letter printed on HSBC letterhead. The letter did not have the senders address or telephone number. The unsigned HSBC letter included an instruction that I should make future payments to MFDP Ltd through Restons Solicitors.

I thought this was rather odd and confusing:

1.       Is it normal for HSBC to use a third party (MFDP LTD) to inform a debtor that they have sold their debt?

2.       Is it right for HSBC to instruct a debtor to pay the new creditor using a particular solicitor, in this case Restons Solicitors.

3.       Why should the payment arrangements made between a debtor and the new creditor (MFDP Ltd) matter to HSBC?

I made some inquiries and discovered that Restons Solicitors is actually a limited company whose “Individual persons with significant control “are the same ones that have “significant control” in MFDP Ltd. Restons Solicitors has been in existence for many years but MFDP Ltd was only incorporated on 11 July 2022.

Is it ethical for solicitors to give advice to a client (Bank) on debts that they intend to buy? I may be wrong but I just feel that the whole thing is not right. Its bothering me a lot. Can someone please help me with the authority or organisation that I should contact to seek clarification?

 [NOTE: My debt has also been inflated by a large amount £5000+, but this is a matter I am pursuing separately. A summary of the facts is that last year, in July 2023, I received my final statement of debt from HSBC which showed that my principal debt was fully paid, but I continued servicing the debt through Restons Solicitors to cover a small balance of legal costs, £520}

Hoenir

Queen24053 said:

Is it ethical for solicitors to give advice to a client (Bank) on debts that they intend to buy? 

The bank will decide on the package of debts to be sold of. The solicitors merely work as collection agents. No advice involved. By offloading the debts (for a discounted price) the bank relieves itself of all administration costs. The collection agency takes on all the commercial risk, i.e. whether it's ultimately profitable or not.  

justinthegreat

Queen24053 said:

I have seen posts on this forum about HSBC selling debts to MFDP Ltd, a debt collection entity.

After selling the debt to MFDP Ltd, HSBC has also been instructing borrowers to continue paying their debt through a preferred solicitor, Restons Solicitors.

I have a debt with HSBC which I have been paying through Restons Solicitors. Last month, July 2024, I received a letter from MFDP Ltd that my debt has been sold to MFDP Ltd and that from then on, I should make payments to them (MFDP Ltd)

Because I never received a letter from HSBC that my debt was sold, I wrote to MFDP Ltd telling them that I would ignore their request unless I get notice of this fact in writing from the HSBC.

In response, MFDP Ltd sent me an unsigned letter printed on HSBC letterhead. The letter did not have the senders address or telephone number. The unsigned HSBC letter included an instruction that I should make future payments to MFDP Ltd through Restons Solicitors.

I thought this was rather odd and confusing:

1.       Is it normal for HSBC to use a third party (MFDP LTD) to inform a debtor that they have sold their debt?

2.       Is it right for HSBC to instruct a debtor to pay the new creditor using a particular solicitor, in this case Restons Solicitors.

3.       Why should the payment arrangements made between a debtor and the new creditor (MFDP Ltd) matter to HSBC?

I made some inquiries and discovered that Restons Solicitors is actually a limited company whose “Individual persons with significant control “are the same ones that have “significant control” in MFDP Ltd. Restons Solicitors has been in existence for many years but MFDP Ltd was only incorporated on 11 July 2022.

Is it ethical for solicitors to give advice to a client (Bank) on debts that they intend to buy? I may be wrong but I just feel that the whole thing is not right. Its bothering me a lot. Can someone please help me with the authority or organisation that I should contact to seek clarification?

 [NOTE: My debt has also been inflated by a large amount £5000+, but this is a matter I am pursuing separately. A summary of the facts is that last year, in July 2023, I received my final statement of debt from HSBC which showed that my principal debt was fully paid, but I continued servicing the debt through Restons Solicitors to cover a small balance of legal costs, £520}

Hi, is this for a loan? Did it go first to HSBC Repayment Services?

born_again

As HSBC have sold it onto a debt collection co, they no longer have a interest in the debt. Many debt co's then sell on to another co. 
Would not be surprising if many are not linked.

DullGreyGuy

Queen24053 said:

Is it ethical for solicitors to give advice to a client (Bank) on debts that they intend to buy? I may be wrong but I just feel that the whole thing is not right. It's bothering me a lot. Can someone please help me with the authority or organisation that I should contact to seek clarification?

Yes it is ethical.

We as outsiders have no idea what the commercial relationship is between the parties, they could be on a contingent basis so get to keep X% of whatever they recover, could be on a fixed fee or time & materials. Maybe even a hybrid of these. 

Selling the debt HSBC gets the cash up front for the whole book less Y% haircut. There can be clawbacks in there if they have misrepresented the portfolio. There can be profit shares too. Clearly there is a value in having cash up front and so you'd expect Y% to be more than X% but clearly we dont know what the percentages are. 

There could be a conflict of interests in that Rentons could be on a contingent funding basis, do a bad job so get very little commission and make a loss in the hope that they could then buy the book with a larger haircut. HSBC will be well aware of the conflict, they will equally know what a good/bad price for the debt is and won't sell it unless it meets their requirements. They'll also know what recovery rates should look like and so not blindly accept the intentional under performance pre-sale.

The law firm won't be advising HSBC on the transaction, I suspect that this is just BAU work for a bank and so is dealt with an internal team that may or may not have legal team members. The parallel in the Insurance works is reinsurance where insurers sell their liabilities to a reinsurer and for day to day deals lawyers aren't used, internal lawyers will be for medium-large deals and you only consider external lawyers in massive deals. 


I am sure HSBC would be touched that you are concerned they didnt get the maximum value for selling the loan receivables but they're big enough to know what they are doing. Generally its the shareholders of a company that hold the directors to account if they are doing bad deals or aren't capable of spotting conflicts of interests etc.

Queen24053

justinthegreat said:

Queen24053 said:

I have seen posts on this forum about HSBC selling debts to MFDP Ltd, a debt collection entity.

After selling the debt to MFDP Ltd, HSBC has also been instructing borrowers to continue paying their debt through a preferred solicitor, Restons Solicitors.

I have a debt with HSBC which I have been paying through Restons Solicitors. Last month, July 2024, I received a letter from MFDP Ltd that my debt has been sold to MFDP Ltd and that from then on, I should make payments to them (MFDP Ltd)

Because I never received a letter from HSBC that my debt was sold, I wrote to MFDP Ltd telling them that I would ignore their request unless I get notice of this fact in writing from the HSBC.

In response, MFDP Ltd sent me an unsigned letter printed on HSBC letterhead. The letter did not have the senders address or telephone number. The unsigned HSBC letter included an instruction that I should make future payments to MFDP Ltd through Restons Solicitors.

I thought this was rather odd and confusing:

1.       Is it normal for HSBC to use a third party (MFDP LTD) to inform a debtor that they have sold their debt?

2.       Is it right for HSBC to instruct a debtor to pay the new creditor using a particular solicitor, in this case Restons Solicitors.

3.       Why should the payment arrangements made between a debtor and the new creditor (MFDP Ltd) matter to HSBC?

I made some inquiries and discovered that Restons Solicitors is actually a limited company whose “Individual persons with significant control “are the same ones that have “significant control” in MFDP Ltd. Restons Solicitors has been in existence for many years but MFDP Ltd was only incorporated on 11 July 2022.

Is it ethical for solicitors to give advice to a client (Bank) on debts that they intend to buy? I may be wrong but I just feel that the whole thing is not right. Its bothering me a lot. Can someone please help me with the authority or organisation that I should contact to seek clarification?

 [NOTE: My debt has also been inflated by a large amount £5000+, but this is a matter I am pursuing separately. A summary of the facts is that last year, in July 2023, I received my final statement of debt from HSBC which showed that my principal debt was fully paid, but I continued servicing the debt through Restons Solicitors to cover a small balance of legal costs, £520}

Hi, is this for a loan? Did it go first to HSBC Repayment Services?

Yes, this is a loan which was initially being handled by HSBC Repayment services. It was later referred to Restons  Solicitors because I defaulted on payments. Then stated paying through Restons Solicitors. But my question really is why is the bank insisting on me paying through Restons Solicitors if they have sold the debt and HSBC will have nothing to do with the debt going forward? This is the bit I do not Understand.

sourcrates

Banks sell debts to debt purchasing companies, these companies normally collect the debt in their own name, but occasionally some will engage a 3rd party collection company, or in this case our old friend Restons Solicitors, to collect that debt on their behalf.

Nothing out of the ordinary, Restons are just acting as collection agent in this case.