Are FCA fairness rules meaningful during live disputes?

pw888

Firstly, apologies if this isn't in the appropriate category as I wasn't sure where it would be best placed. The question applies to anything under FCA jurisdiction but the reason I'm asking is due to a dispute I'm currently embroiled in pertaining to a credit card account.

I suspect my former card provider is breaking FCA rules in order to perform recovery activity to collect a disputed debt from me. I also think that failure to adhere to the FCA handbook contributed towards the dispute arising in the first place.

Obviously if you find yourself in a disagreement with a financial institution as a customer, you can raise a complaint with the FOS. But where do you stand as a customer if a bank is pressuring you for payments towards a debt or an agreement that you contest whilst the investigation is being conducted?

Obviously, just because a complaint is accepted by the FOS, it doesn't mean that all accounts be put on hold and all obligations be suspended. But surely enforcement should be proportionate to uncertainty? Especially given principles laid out in the FCA handbook.

My understanding is that the FCA handbook is designed to balance contractual rights with fairness. It expects firms to investigate disputes properly, avoid undue pressure, and act proportionately where things are unresolved. It doesn’t say disputes freeze obligations automatically, but it does suggest that enforcement should be handled with care when liability isn’t clear.

From personal experience, it seems as though nothing can be done about it if you think your bank is behaving inappropriately and not following these principles during the time it takes for the investigation to reach a conclusion. This can potentially take many months, during which time things could get out of hand and become very stressful.

For example, I have recently been issued a default notice by my former card provider regarding the amount that I dispute. Since the start of the dispute last June, I have repeatedly requested them to pause recovery activity until the outcome of the case, especially as they have not provided any kind of tangible counter argument or any evidence at all as to why my claim isn't valid as per FCA rules laid out in CONC 7.

The default notice also threatens potential "court proceedings" which seems to unambiguously contradict CONC 7.15.10. I have obviously raised this with the lender, the FOS case worker and the FCA though their enquiry inbox but nobody seems to have an answer in real time. My case worker said he could make an "informal" request but this seems to have been ignored by the lender. I have also contacted citizens advice about this but they are also stumped.

It's also interesting to note that the default notice came after the FOS case worker had released a preliminary report finding that the lender had indeed acted unfairly and had requested more time to respond to it. I'm not sure how any fair minded person can think this is appropriate to send me a default notice on the back of this, but maybe I'm not thinking clearly as I'm finding the situation increasingly unsettling and I'm obviously biased in my own favour.

I was just wondering if anybody has had a similar experience and what are people's thoughts?

Thanks.

eskbanker

A poster objecting to Santander's introduction of charges for accounts sold as free laid out the following similar case for institutions being obliged to put enforcement on hold during FOS dispute - it seemed to rely on interpretation rather than clear unambiguous citation though:

https://forums.moneysavingexpert.com/discussion/comment/81749955#Comment_81749955

Isthisforreal99

With next to no context it's impossible to say whether it's fair or not. Either the money is due or not and it's been 8 months since the June you refer you with little progress and you seem to be arguing semantics about due process rather than 'is the money due to the credit card company'. In what context is the debt disputed, and I'm sure the wise on this forum can give an opinion of the validity of your case. Sometimes it's better to pay then challenge later.

born_again

Obviously if you find yourself in a disagreement with a financial institution as a customer, you can raise a complaint with the FOS. 

So long as you have exhausted the financial institution's complaint process

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81880436#Comment_81880436

OP's case is with FOS…

pw888

https://forums.moneysavingexpert.com/discussion/comment/81880371#Comment_81880371

Thanks for your reply. So to clarify, the lender and I dispute the debt as we disagree on whether the money is due or not. They think it is, I think not. As I have exhausted the lenders complaint procedure, that decision now lies with the FOS.

As I'm sure you're aware, FOS investigations can span over a period of many months, possibly over a year. Arguing over due process or whether or not the money is due are not mutually exclusive here and I have done both. The point of the post is to question whether or not the "due process" is meaningful or not in real time, or is it a case of nobody can stop excessive/ unfair and potentially harmful recovery activity until a lengthy investigation is concluded and any unfair behaviour is retrospectively addressed. The latter to me seems quite troubling.

I didn't want to explain my particular case in the original post as it has become quite complex and messy and would require a large wall of text to do so but I'm happy to answer any questions about it. The context provided is that the lender has put forward no tangible argument and they have provided no evidence at all to substantiate their position. The FOS case worker has provisionally agreed with my position in his preliminary report that the lender has acted unfairly. This means that essentially money isn't due and he repeats my original arguments in my original complaint to the lender verbatim.

Upon receipt of the report, the lender requested extra time to respond and I subsequently received a default notice threatening to take me to court. I used CONC 7.15.10 as an example as it is fairly unambiguous and therefore less open to interpretation and a debate over semantics. Either it is permitted to take me to court before the final FOS verdict or not? If not then surely the letter is highly inappropriate?

eskbanker

I subsequently received a default notice threatening to take me to court.

Does it actually state (or even imply) that legal action is imminent, or just that it could be the ultimate result of failing to address the debt that's defaulted?

My understanding is that regulated institutions are actually encouraged to issue default notices at the earliest opportunity.

pw888

https://forums.moneysavingexpert.com/discussion/comment/81880509#Comment_81880509

The default notice gives me a specific deadline to make a payment. It then goes on to give a list of options they will choose from if I don't comply. Court proceedings is one of the options so it doesn't explicitly claim they intend to take me to court. It does however, seem ironic to give me a deadline after they have been given a deadline themselves to respond to the FOS suggesting they have acted unfairly.

When you say encouraged, who by? The FCA? It would make sense but I would also like to think that common sense and discretion should be applied when FCA rules conflict with guidance.

eskbanker

When you say encouraged, who by? The FCA? It would make sense but I would also like to think that common sense and discretion should be applied when FCA rules conflict with guidance.

I think the FCA has a hand in it, but also the ICO, in the context of data held by the credit agencies being accurate and up to date, i.e. it's important to other parties to know if an account has defaulted. Some brief research points to what's referred to as SCOR guidance, which effectively suggests that an account should be defaulted no later than six months after falling into arrears (so not literally asap!):

https://www.scoronline.co.uk/wp-content/uploads/2021/05/Principles-for-the-Reporting-of-Arrears-Arrangements-and-Defaults-at-Credit-Reference-Agencies-version-2a-final-updated-to-refer-to-GDPR-and-DPA-2018.pdf

I'm not particularly familiar with this though, and have just seen references to it previously on other boards on here, such as the credit files one, so others may be able to shed more light on it…

pw888

https://forums.moneysavingexpert.com/discussion/comment/81880592#Comment_81880592

Ah ok thanks, this is interesting as it helps explain some of their behaviour. The question still remains though about rules and guidance in place to try to ensure fairness. It still seems to me like the adherence of guidance is selective with the regard for fairness being the lowest priority, which I don't think makes sense as then it is completely undermined.

I also think that it creates a kind of paradox, if the fairness aspect of the rules is ignored, then it also undemines the integrity of what the ICO is trying to achieve here. If liability is genuinely disputed and later found to have been enforced unfairly, reporting arrears in the meantime doesn’t just undermine fairness, it also risks compromises the ICO’s core objective of ensuring credit data is accurate. Data recorded during unresolved uncertainty may turn out not to reflect the true position at all.

This is why I'm asking the question of whether FCA fairness rules mean anything during disputes as it seems they don't from personal experience. In my particular case, I also appealed to CONC 7.5.3 and CONC 7.14.1 with reagard to pausing recovery activity but it falls on deaf ears. The approach of it being best to pay now and question it later also, I think, compromises these fairness princples that enforcement should be proportionate to uncerainty.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/comment/81881040#Comment_81881040

Fairness goes both ways though, if everything had to go on hold each time a customer complained people could just get extra interest free periods by disputing everything spuriously. In reality they are somewhat loaded in the customers favour as if the bank is found to be in the wrong they will be instructed to unwind any interest, compensate for the losses and inconvenience caused and pay 8% simple interest. Whereas if the bank was found to be in the right (as most cases are with the ombudsman) the customer won't be told to pay an extra 8% interest or repay the FOS fee for making wrong allegations against the bank.

The default letter will be a stock letter that everyone that defaults gets. Just because they threaten recovery action doesnt mean they will follow through with it but it causes issues down the line if they dont make you aware of recovery action and then attempt it after the FOS says you are wrong.

Undoubtedly the FOS would recommend that you make the minimum payments and they will get the company to unwind them and pay the 8% if they decide they were wrong. Else you are just creating problems for yourself in the future in the case of the FOS deciding you are wrong.