Debt collectors' have changed their tactics and become less aggressive thanks Government guidelines, according to a review released by the Office of Fair Trading (OFT).
The OFT's guidance on debt collection was issued in 2003, and sets out minimum standards for debt collection by those holding consumer credit licenses. Respondents to the OFT review - findings were released this week - said they found the guidance clear and easy to use, and consumer advisors said that they and their clients found the guidance to be a useful tool for challenging unfair behavior by creditors and debt collectors. Consumer advice organizations said that the most serious practices, such as threats of violence to debtors, had reduced as a result of the guidance.
There have also been some positive changes in industry behavior as a result of the guidelines, which include:
• The creation of dedicated complaint handling units
• The revision of standard letters where they had the potential to mislead or be perceived as threatening, and
• Cessation of anonymous telemessages to contact debtors.
But there is still a lot to be done: between April 2004 and August 2006, 17 per cent of al those licensed to collect debts have attracted complaints from customers. The most common consumer grievances are receiving threatening statements from companies, being contacted at unreasonable times and firms failing to investigate disputed debts. The study also showed that many consumers are being threatened with court action, but say they the process is not being explained properly.
Alan Williams, Senior Director of Markets and Projects at the OFT said that as a response to the review, the OFT issued minded to revoke notices to nine licensed debt collectors; three retained their licenses, six surrendered their licenses and informal action was taken against 92, but he is very aware that there is still a long way to go. He said "We are pleased with the praise for our guidance and welcome the positive measures taken by the industry to reduce unfair practices but more still needs to be done to improve levels of compliance around debt collection. If companies engage in unfair debt collection practices we will continue to take firm enforcement measures to stop them. This could involve formal action to refuse or revoke their license, or warning and advising companies how to change their behavior. Our aim is to increase consumer welfare in an area where those in debt are already vulnerable."
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