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Creditors and Your Rights

Unfair Practices
Third Parties
Debt Collection Visits
Statute Barred
Communicating with the Debtor
Other Unfair Practices
The OFT

The Office of Fair Trading provide guidelines to creditors and Debt Collectors on what are considered fair and unfair practices in debt collecting procedures. The Office of Fair Trading issues Creditors with Consumer Credit Licenses, which enable Creditors to lawfully lend money to consumers.

Creditors are expected to follow the guidelines outlined by the Office of Fair Trading in order to be seen as fit to lend money. This also includes fair practices of debt collection. If a creditor or debt collector is found to be practising unfair tactics when it comes dealing with consumer debt, they risk losing their Consumer Credit Licence.

The Office of Fair Trading expects creditors to abide by their guidelines.

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Unfair Practices

There are those amongst the creditors who do practice unfair tactics in order to recover monies owed to them. This could be because of a number of reasons. Either the people who do this are unaware of the guidelines outlined by the OFT, or they rely on the consumer not knowing their rights and how they are protected. In either case lenders are at risk of losing their Consumer Credit Licence if an investigation is carried out into their business practices.

Some of the guidelines outlines by the OFT according to the Debt Collection Guidance, July 2004 are as follows:

Third Parties

Some debtors may find themselves struggling to pay their debt each month and realise they need help. Therefore, they seek advice and help in negotiating reduced repayments to their creditors each month. They nominate a third party, such as a Debt Management Company, to deal with their debt and negotiate repayments with their creditors.

It is considered unfair practice for a creditor or debt collecting agency to refuse to deal with a third party nominated by a debtor. The only time refusal to deal with a third party would not be considered as unfair is if the third party is not acting in the best interest of the debtor. Debt Management Companies themselves must abide by the guidance set out by the OFT for Debt Management procedures. If a creditor refuses to deal with the elected third party, they must give a valid reason as to why.

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Debt Collection Visits

It is considered unfair for a debt collector to visit a debtor’s place of work unless it is a business debt.

It is acceptable for debt collectors to visit debtor’s homes if the debtor has agreed or requested a visit; debts are disputed or deadlocked, or the debtor has avoided contact. However, debtors must be forewarned of a visit and given time to seek advice or support before the visit. If a debt collector comes to your door and you request him/her to leave, they must do so.

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Statute Barred

A debt is considered Statute Barred if a creditor has not contacted a debtor for a period of 6 years and no action has been taken on the account.

Although the debt is still legally acknowledged as being owed, the creditor is not able to take any legal action against the debtor in order to recover the debt. It is considered unfair if a creditor or debt collector misleads the debtor into believing the debt is still legally recoverable. It is also considered an unfair practice if the creditor or debt collector press for payment after the debtor has stated they will not be paying the money owed. This could amount to harassment contrary to Section 40(1) of the Administration of Justice Act 1970.

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Communicating with the Debtor

A creditor or debt collector who contacts you by phone, letter or visit, must state clearly who they are, where they are from, their role and the purpose of contact.

If a creditor or debt collector attempts to use unhelpful technical language to confuse or mislead the debtor, this is considered as an unfair practice.

If a creditor or debt collection agency disregards requests made in respect of when and where to contact the debtor, this can also be classed as unfair. If you request a creditor not to contact you at work because this could jeopardise your job, and the creditor disregards your request, this could be classed as unfair practice.

If a creditor or debt collector tries to continue to make contact knowing you are vulnerable, suffering from illness caused by the situation or seeking medical advice, this could also be classed as an unfair practice as they are putting undue pressure on the debtor.

Although specifics are not detailed as to what is classed as unfair, all situations are investigated on a case-by-case basis. If a creditor is found to be practicing unfair tactics, this could in turn show them as unfit to hold a Consumer Credit Licence and the OFT has every right to revoke their licence.

Creditors are fully responsible for third parties they appoint, such as in-house and outside debt collecting agencies, so if they are using third parties who practice unfair tactics, they are in turn risking loss of their own licence. They are responsible for fully screening the third parties they use and ensure they are aware of and practice, the guidelines outlined by the OFT before using their services.

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Other Unfair Practices

It is unfair for a creditor to mislead a debtor into believing criminal action or criminal proceedings will take place when attempting to recover a debt. BEING IN DEBT IS NOT A CRIME!

Creditors must not suggest to a debtor to either sell a property or to take out further borrowing in order to pay off the debt to that creditor. For a creditor to request you borrow more money to pay them off is basically requesting you to commit fraud as you are taking on credit knowing you cannot pay the debt back.

Creditors should not use more than one debt-collecting agency at any one time.

If a debtor queries a debt, and money that is owed, it is unfair for the creditor to continue with recovery proceedings during the time the debt is being disputed. If requested, the creditor or debt-collecting agency must provide details of an outstanding debt. It is not all up to the debtor to prove they do not owe a debt, is it up to the creditor to prove they do if the debt is disputed.

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The OFT

If a complaint is made to The Office of Fair Trading, they have a duty to respond to complaints made to them. They are committed to ensuring their guidelines are carried out. They have the rights to investigate company’s practice at any time. A raid on a company for an investigation can be carried out at any time in order to discover if the creditor is seen as fit to hold a Consumer Credit Licence. If the Office of Fair Trading decides the creditor or debt collecting agency have been acting in a manner that is classed as unfit, their licence can be revoked and the company will be out of business as they will no longer be able to trade without a licence.

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