Debt Collection (Consumer Credit Act)

Let me turn to the scale of the action that the OFT has already taken, because I suspect that my hon. Friend is not aware of just how much activity has taken place. I should add that the OFT's debt collection guidance covers such practices. In particular, it says that putting undue pressure on debtors is considered to be oppressive, while ignoring claims that a debt is disputed would constitute unfair practice by the debt collector. Debts are often disputed by those being pursued for them, and, in such cases, the industry's immediate response should be to suspend debt collection, and the case should be thoroughly looked into. Indeed, if that had only happened in the case of Mrs. Brazier, she might still be with her family today. Let me again be clear to the House and to such companies: if a licensed debt collection agency or a creditor persistently fails to comply with the OFT's debt collection guidance, or if there is evidence to substantiate claims that the licence holder has engaged in unfair business practices, the OFT can ultimately revoke its licence, effectively putting the trader out of business. Any persistent failure by a creditor to provide accurate information could also reflect on that business's fitness to continue to hold a licence. As I have mentioned, since April 2008, the OFT has had a strengthened role, requiring the provision of more information from businesses engaged in high-risk credit activities, such as debt collection, when they apply for a licence or to renew an existing licence. That is to ensure that business will be carried out to a reasonable standard. In some cases, the OFT will commission on-site visits and reports from trading standards officers to help in its judgment about whether at the heart of a business's processes and procedures—what it actually does—there are genuinely good standards: for example, whether adequate staff training procedures are in place to ensure that a firm's legal responsibilities are properly understood at every level of the organisation. I should tell the House the scale of the action that the OFT has already taken. It has already initiated a total of 186 so-called warning and advisory letters, which have been sent to businesses in the sector. In addition, a further 22 formal actions have been taken, resulting in, for example, seven licences being surrendered, four licences being refused or removed, four businesses being given significant undertakings and four cases in which requirements have been imposed. I recognise the statistic cited by my hon. Friend about OFT action, but I hope that he will recognise that far broader enforcement activity has taken place. Let me give specific examples of recent informal and formal action. In April 2008, in response to an increase in complaints about debt collection practices, the OFT wrote to 13 companies—including debt collection and trace agencies, debt purchase businesses and financial institutions—warning them to take steps to improve their debt collection practices. Among the more serious practices identified from the complaints were the chasing of consumers for payment of debts that they did not owe, partly because of over-reliance on the poor data provided by creditors and poor or inappropriate tracing activities; failing to properly investigate disputed debts; and employing an over-aggressive or oppressive approach to recovering debts, including, on occasion, refusing to deal with or bypassing third-party representatives such as citizens advice bureaux. The 13 companies were required to review their policies and procedures for tracing debtors; that included keeping client information up to date and maintaining its accuracy. The OFT was satisfied with the responses of four of the companies and the steps that they had taken to ensure compliance, but it will continue to monitor complaint levels. It is still in the process of assessing or seeking information from the remaining nine companies. That could include carrying out on-site competence visits or seeking further information using its powers under the Consumer Credit Act. At least one major debt collection company has updated its automated systems to reduce the likelihood of collection activity continuing when the consumer has disputed the debt. The OFT will be writing to creditor trade bodies reminding them of their responsibility to ensure that data used for debt collection are accurate and asking them to take action to improve the data that they pass on to debt collectors. My next example involves the requirements imposed on 1st Credit Ltd. After an investigation, it was found that some of its business processes and procedures failed to meet satisfactory standards. As a result, that company and its associated companies must refrain from issuing statutory demands warning of bankruptcy when it is unlikely that proceedings will be initiated; not discuss legal action with consumers, unless it is likely that such action will genuinely be taken; ensure that sensitive cases involving vulnerable individuals—for example, those with mental health problems—are dealt with appropriately; and ensure that all matters of concern raised with them by the free advice sector and other third parties are dealt with appropriately. A considerable amount of activity to raise standards in the industry has been initiated. However, I recognise my hon. Friend's central point: more action is needed. I have been working with the Credit Services Association, the main trade association in the sector, to get it to remind its members of their obligations to have the highest standards. The association has responded in a positive way. In particular, it has agreed to my request that it should offer debtors who contact a debt advice agency for help in sorting their finances a 30-day breathing space to get their affairs in order. That follows our success in getting the credit card sector to agree a breathing space for its customers who approach a debt advice agency for first-time help. I am also calling in representatives of the utility sector for similar discussions about how they can best help customers having problems with their debts. My hon. Friend will have seen the announcement by my right hon. Friend the Prime Minister, confirmed again today by the Chancellor of the Exchequer, that a White Paper on consumer matters is being prepared, and that will touch on this subject. This sector and industry are under the spotlight. Ministers, the OFT, Members of this House, the media and our constituents are all watching closely the activity of businesses in the sector. Considerable work has already been done to challenge poor standards and there has been progress, but I recognise that there is more work to do. Question put and agreed to.