Issues concerning debt collection complaints make up much of the February 2019 issue of Ombudsman News, the regular newsletter of the Financial Ombudsman Service (FOS)

All firms engaged in debt collection activities need to make sure:

  • They comply with both the letter and the spirit of all Financial Conduct Authority (FCA) debt collection rules
  • They observe TCF at all times
  • They always seek to understand the precise nature of their clients’ difficulties
  • They ask for an income & expenditure form to be completed where appropriate, to assess the borrower’s updated financial situation, and consider the information provided on these carefully
  • They freeze or waive late payment charges where appropriate
  • They signpost people to appropriate sources of advice, e.g. Money Advice Service (MAS), debt agencies such as StepChange, their doctor, the Samaritans
  • They co-operate with debt agencies that borrowers have already contacted on their own initiative

The FOS says that common allegations made in debt collection complaints include that firms have:

  • Made excessive contact with the borrower – whether by phone, letters or both – about a debt
  • Demanded repayment of a debt that didn’t belong to the individual at all
  • Demanded too much money, or tried to collect debt that had already been paid in full or was being managed by a debt management company
  • Added excessive fees to debts
  • Chased borrowers for unenforceable or statute-barred debts

The case studies in the newsletter include:

  • A firm that incorrectly told a customer she owed more was ordered to clear the overcharge and to bring the balance and repayments down to the correct amount, and to pay £100 compensation for the trouble and upset
  • A bank was ordered to pay compensation from the FOS’s extreme band (over £5,000) after it had taken them three years to refer a couple to their specialist vulnerable customer team. By that point, they had been unable to keep up with their payments and the bank had already started court proceedings
  • A doorstep lender was ordered to pay compensation from the FOS’s moderate band (less than £500) after repeatedly phoning him about his debt when he had asked for communication by letter only
  • A bank was ordered to pay compensation from the FOS’s substantial band (£500 to £2,000) after failing to give him a break from their debt communications to take account for his mental health condition

The newsletter also contains the latest complaints statistics. Again, there have been significant rises in the numbers of complaints made to the FOS about some forms of credit.

Instalment loans have an uphold rate as high as 67% in Q3 and 61% across the financial year 2018/19 to date. For guarantor loans, the uphold rate is much lower, at 20% in the last quarter and 27% in the year to date, and both figures are lower than the FOS average uphold rate across all products of 33%.

However, for both types of loans, the FOS has received many more complaints than was the case in the 2017/18 financial year, suggesting borrowers are now much more willing to complain about their lender. For instalment loans, the 2017/18 total was 1,122, yet the first three quarters of 2018/19 saw 3,583 complaints. For guarantor loans, overall complaint volumes remain fairly low, but there were only 210 complaints in 2017/18, yet there have been 349 so far this year.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article