Companies hired by banks stand accused of using bullying methods, as well as failing to check the identity of their targets, reports Tracy McVeigh
Debt agencies use unethical or even illegal methods to hound debtors, and are increasingly targeting the wrong people, according to consumer groups and the Office of Fair Trading.
This year debt collection agencies are chasing more than £20bn of consumer debts. Consumer debt in Britain stands at more than £1.4 trillion, but banks, building societies and credit card companies are increasingly reluctant to chase bad debts themselves and are selling them to agencies. In 2007, £7bn of debts were sold; this year, that could rise to £10bn.
When Paula Johns received a letter from a debt collection agency, her first thought was to ignore it. The same day she was telephoned by a man at home. “He just kept asking me over and over for my credit card details. He didn’t listen to a word I said. It was so frustrating that I began to actually feel scared and I was shaking.”
She hung up. Within an hour her mobile rang, it was someone else from the same agency. “I had no idea what the debt was for. I asked, but it was like speaking to a robot, they kept telling me not to get aggressive. It was truly awful. I ended up sticking it on my credit card to get rid of them. I’ve been made redundant, and it was £100 I couldn’t afford.” Johns, 27, is still mystified about what the money was for, but the risk of finding herself credit blacklisted was too much.
Chris Ball had letters sent to his neighbour after his business collapsed, leaving him unemployed. “It was all part of their intimidation. I lost everything when my business went bust. I lost my house, my car, [but] I don’t own anything any more and that meant they had nothing to take off me, so I wasn’t scared. People are being harassed and bullied, a lot of the time totally illegally, and at a time which is already hellish for them.”
Now running a website to help people in similar situations, Ball has calls from people being unfairly pursued by debt agencies all the time. “A friend of mine lost someone to suicide over it,” he said.
Citizens Advice is being swamped by calls from people suffering debt problems and many are complaining of harassment from agencies. Its policy officer, Alex MacDermott, said: “There are a lot more problems with debt collecting agencies than there used to be because more and more debt is being passed on. A lot more banks and other firms use collectors to keep aggressive tactics at arm’s-length from their own reputations – it’s not them being tough and mean.
“They send people constant automated text messages and letters and threats and people pay up, but they pay on their credit card so they are just moving their debt around. In terms of strategy, it works great for the agencies, but badly for people struggling with debt. But people’s instinct is to pay whoever shouts the loudest – and that’s the collecting agencies.
“They are using bullying practices a lot more than we would like to see. People need to get advice and to get in touch with the agency the minute they get the first letter.”
The growing problem was not unexpected. Professor Nick Wilson, of Leeds university’s business school, said: “There were big signs that household debt was rising in 2000 and the signs of stress from 2003. Now we’re seeing a big rise in personal bankruptcies and a massive shift from the big lenders collecting debts themselves. It used to be a last resort to call in a debt collecting agency, but now there’s a trend to sell the debt off quickly. At the moment, they are selling on debts for about 10% of the face value. Agencies will do some scary things to collect that money and the volume of debt is increasing so we’ll expect to see a big wave of households running into trouble soon.
“The debt collecting agency is quite sophisticated – it’s basically a big call centre with a lot of technology, a lot of automation which means a lot of automated letters being sent which can be hard to stop. The lack of contact with a real person adds a lot of extra stress.”
The Samaritans reports that one in 10 of its callers is under financial stress. “Anecdotally lots of our volunteers are reporting more and more people calling up with recession- and debt-related issues,” said a spokeswoman.
The OFT has the power to remove the licence of companies that are acting illegally and this year it has already moved against two agencies. A spokeswoman said there were many more firms under investigation, but not at a stage where they could be “named and shamed”.
“There is a lot goes on behind the scenes and the threat that a company could lose its licence is usually enough to bring it back into line,” she added.
But many believe the OFT is toothless in regulating these companies. “The OFT is a complete waste of space,” said Mike Thompson, a company director. He has just won a case against a debt collecting agency called Aktiv Kapital which had been threatening him with court for two years and even put a default notice on his credit record. The company wanted £640 from him, but it was owed by someone with the same name.
“I was irritated by it and irritated by the way the law lets these companies ride roughshod over people,” he said. “A lot of people I know in my circumstances would just pay up, just to stop the hassle even if they know it’s not their debt. Being powerless to stop court proceedings scares people, especially older people. Frankly, I’m sure these companies know and bank on that.
“I have become aware of so many people being chased wrongly by these immoral companies and leant on heavily, near violently. The fact is that I am a professional, I’m a director of three companies and I know how to stand up to these people and I won in the end. These people are rogues.”
Kurt Obermaier is executive director of the Credit Services Association, the industry body representing 300 debt collecting agencies that will be chasing £20bn of debt this year. He insists agencies do an essential job: “Debt is an asset and an asset you can dispose of, and that’s what happens. We have guidelines for our members and if we can help clear debt then that is a positive thing.
“Nobody comes round and smashes your window in. All our members try to come to an agreement with debtors wherever possible. Not everyone is whiter-than-white, but the majority of agencies have a strict code of conduct and complaints of aggressive behaviour are exaggerated.
“And we are far from prospering while others suffer. When times are bad, things are bad for us too. It may sound perverse, but when the economy takes a downturn we do get more to collect, but the recovery rate is considerably lower.”
He admitted that the wrong people being chased for debts was a growing problem: “If you are trying to trace someone, you are cross-referencing all sorts of data sources and it can be confusing. The voters’ roll used to be a good source but now access to that is being restricted.”
He denied that companies sent out lots of letters in the hope that one of the addressees would be the right one.
Simon Cook, a partner at law firm Ormerods, represented Mike Thompson. “Our perception is that it’s a credit crunch problem that’s getting worse and worse,” he said. You wonder whether the people who buy these cases to chase debts take sufficient care in what they are buying. It leaves people in the position where they have to prove they are not who the debt collectors say they are, and these companies have the power to affect their credit references. Taking legal action has many obstacles, there certainly isn’t legal aid available and it’s not something most people do lightly. Mr Thompson is an extremely strong-minded person with the will, the time and the money to fight back; not many people are in that position.”
CCTV evidence is false, but they don’t listen
If a stranger accosted me in the street and asked for £95, the answer would be “no chance”. So when a letter arrived from a debt collection agency demanding nearly £100 for a parking “offence” that I had not committed, I felt equally adamant I wouldn’t hand over the money.
“This is a formal notice of intended court action,” the letter from Commercial Collection Services (CCS) said. “We may take action if you fail to PAY THE FULL AMOUNT YOU OWE WITHIN SEVEN DAYS.”
If a court order was obtained, my property could be taken and sold, deductions could be made from my wages and I might find it impossible to get credit, it threatened.
Then came: “THIS PROBLEM WILL NOT GO AWAY AND WE INTEND TO RECOVER THE FULL AMOUNT YOU OWE WITHOUT FURTHER DELAY.”
I was innocent, yet felt bullied and intimidated – and furious. I rang to tell them I was in dispute with the parking company, G24, and would not be paying. G24 claimed I had exceeded the time limit at a leisure centre car park. In fact, I had left within the limit and returned to pick up my mother-in-law and two-year-old daughter. Its claim was based on “evidence”, using CCTV footage of my first arrival and second departure.
I have written to G24 four times explaining its mistake. It runs its own appeals service, which is like appointing the prosecuting counsel as the judge. There is no independent adjudicator to sort out disputes between drivers and private companies that run car parks in leisure and shopping centres. Needless to say, my appeal was unsuccessful.
Finally, I asked G24 to issue court proceedings. It would surely have to produce the CCTV footage in court and I could prove my innocence. A lawyer said he would be astonished if they took me to the small claims court, because it costs around £30 to issue proceedings. He said they would pass the claim on to a debt collection agency. The letter from CCS duly arrived.
In my conversation with CCS, I was told that, if I didn’t pay, I could be taken to court. “Bring it on,” I said. “Don’t be aggressive, madam,” came the reply, along with the threat of doorstep collectors.
“Just pay it,” my husband said, perhaps because the car is registered in his name and the letters are addressed to him. “It’s taking up time and making you stressed.”
This is what these companies rely on. The lawyer said most people pay up by letter three. But I’ve done nothing wrong. I am determined not to give in to threats and bullying, but how many others do?
Without fear of trespass
To remove the need for people to defend their privacy so doggedly, make the public square safe
ID cards didn’t do it. CCTV cameras didn’t do it. Not even the Terrorism Act could rouse the masses to indignant protest about the erosion of their privacy. But recently we learned something could: news that a company called Connectivity was to launch a new mobile phone directory so appalled the nation that the service’s website crashed under the weight of people opting out, and the service was suspended. “I’d find it quite intrusive actually,” said one woman stopped on the street by BBC’s Working Lunch, whose report ignited the protests. “I think whoever gets my mobile phone [number], I should be giving it to them.”
On the face of it, this outrage seems bizarre. Go back only 20 years, and almost everyone was happy to be in the phone book. Ex-directory used to be the exception; now an Englishman’s phone is his castle. Yet the same people who think it is an affront to privacy to give out a mobile number often think nothing of revealing their date of birth, relationship status, and much more intimate details on social networking sites.
What explains this paradoxical combination of opening up in some respects, and clamming up in others? An important part of the answer is that personal information is more ruthlessly commercially exploited than it used to be. You were in the phone book simply because you had a phone. You’re on Connectivity’s website, however, because someone was paid to hand over your number.
In the past we didn’t worry about ownership of contact details because they were not treated as property. Now they have become commodified, we quite naturally want to make sure that we, and not others, retain ownership.
On social networking sites, we may expose ourselves, but we choose to do so. We are in control and, often wrongly, we do not feel we are giving away tradable data. In a strange way, social networks recreate a virtual version of what used to be the social reality, a place where we don’t mind people knowing how to get hold of us. But we are as paranoid in the real world as we are naive in the virtual one. Whereas we once trusted that information would not be abused, we now assume that it will.
The commodification of personal data is an often-overlooked factor in the erosion of community. It explains, in part, why society is becoming a collection of individuals vigilantly guarding their own individuality, suspicious of anyone who comes too close to it. This is the darker side of the cult of privacy, with its belief that privacy is a right that needs defending. That kind of privacy needs attacking. Privacy is indeed important, but if the private sphere grows, the public square shrinks. And as the etymology suggests, that is a privation.
That is why always focusing on defending privacy risks getting things the wrong way round. The priority should not be to defend the defence mechanism, but to neutralise the attack. We need solutions that go to the roots of the initial problem, ways of eliminating the fear that people have that, if they give an inch of personal information, someone will try to take a mile.
The priority should be to make the public square safe again, not to make the private realm more of a fortress. This means more robust rules on cold-calling and junk mail, which should both be explicitly on an opt-in basis only. It also means making it possible to go to physical public spaces without having to put up defence mechanisms: it should be illegal for anyone to accost you in a public area, for commercial or charity purposes. People should be enabled to put down their drawbridges without fear of trespass, not empowered to build more moats. We need to remove the need for people to defend their privacy so doggedly, and so address the cause, rather than the effect, of our private anxieties.