ARTICLE...
Ripples of Regulation
Industry publication meets with OFT to discuss latest concerns
Last month Credit Today was invited to meet with the OFT to discuss growing industry concerns over the public imposition f requirements on debt collection and debt purchase firms.
In a full and frank discussion with the deputy director of credit and the head of debt collection unit, one of the themes to emerge was concern over data quality for debts sold by telecoms and utility firms. As the OFT gets to grips with many of the other issues it has looked at since its powers changed last year, it now has time to turn to this area, as well as that of tracing.
Indeed, recent requirements imposed on debt collectors and debt purchasers by the OFT have left the industry in no doubt that it is high on the regulator's agenda. Several companies have had requirements imposed on them this year - three of which have been made public. In addition, the OFT is working on its debt collection guidance and will publish an updated version later in the year.
Last month the OFT warned the debt collection and tracing sector that using neighbours to pass on messages to trace subjects is an unacceptable practice and should be ceased immediately. It said such a trace method as the potential to reveal to neighbours that individuals are being pursued for payment of debts and said any businesses that continue to do this face enforcement action. At the same time, it imposed requirements on debt buyer Link Financial to confirm that it will no longer engage in this practice.
Link has agreed to the request to stop and has made proposals to address the OFT's concerns. Selina Burdell, chief operating officer of Link, welcomed the new approach to licensing renewal. She said: "The OFT representatives and process in general were both professional and thorough, and I believe that this will undoubtedly result in higher standards across our industry as a whole."
The OFT made the requirements following Link's application to renew its consumer credit licence and imposed requirements on Mackenzie Hall and 1st Credit earlier this year. All three occurred at the time of licence renewal, which is clearly a hot spot for examining companies' behaviour.
However, some in the industry have expressed concern about the publicity around the requirements. Leigh Berkley, chairman of the DBSG, said non-compliant behaviour should be stopped but added: "Doing this by press release is not the most helpful way. Some requirements are on things that people stopped doing two years ago but because it is a five year review they are putting it in the public domain. The OFT is not making that clear."
Berkley added that even companies that have never had complaints upheld are concerned about licence renewal. At the time of writing, the DBSG and CSA were meeting to discuss collections guidance for debt buyers and were due to meet the OFT on the issue.
One debt buyer, who preferred not to be named, said he is concerned about the way complaints are viewed.
They said: "No matter how strong your processes you're going to have isolated incidents when things go wrong - and we take those incidents very seriously.
"The OFT needs to look at the volume of complaints in proportion to the size of the business as you could have someone who looks after 200 accounts and has 10 complaint s and another 4 million accounts and 10 complaints."
He added that many 'complaints' logged at Consumer Direct are actually queries about processes.
In a meeting with Credit Today, Nigel Cates, OFT deputy director for consumer credit, and Rita Hall Hughes, head of the debt collection team, made it clear that more companies will have requirements imposed on them in the coming weeks and months. They were unapologetic for making the requirements public, saying the OFT has repeatedly warned the industry over certain issues.
Cates said until April last year the only recourse the OFT had was to take away a licence.
"Companies knew we weren't going to do it," he explained, adding that, while it may seem unfair, publicising requirements against certain companies is an effective way for the regulator to use its resources to force changes across the whole industry. The OFT said it looks less at the number of complaints than the seriousness of the issues and the potential detriment to consumers.
Cates said the view of requirements as punitive is incorrect and that in fact the companies going through the processes are generally good companies.
"When we impose requirements we want that company to continue in business. We just don't want them to do certain things."
He raised the possibility of issuing statements later in the year, praising those companies that have demonstrated compliance after requirements were imposed.
He explained: "We don't want an antagonistic relationship with the industry and we don't think we have one. We want the industry to raise its standards. With large numbers of transactions we accept the fact that occasionally things go wrong with processes. We want a good relationship with responsible companies to deal with issues with them."
Cates added: "There is work to be done with the sector but it's a long way off from demonstrating the worst problems we see. As some of the main problems are cleared up it enables us to cover new areas like debt purchase and telecoms and utilities."
The OFT is clearly concerned about the issues of data quality and tracing in debt sale - particularly small balance utility and telecoms debt. Several times Cates and Hall-Hughes emphasised that strong enforcement of debts is desirable for won't pay debtors - as long as the data is good enough to ensure against mis-trace. Conversations are already underway with utilities and their regulators and meetings with telecom companies are to follow.
Cates explained: "The onus is not all on the debt collection industry - a lot of the responsibility should lie with creditors, some of whom are selling debt on with little or no information."
Original article by Heather Greig-Smith, Editor, courtesy of Credit Today. For further information visit www.credittoday.co.uk
