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Debt Collection

Volume 490: debated on Monday 30 March 2009

To ask the Minister of State, Department for Business, Enterprise and Regulatory Reform if he will take steps to ensure that debt collection procedures by banks, other financial institutions and their agents adhere to Office of Fair Trading guidelines on proportionality and on reasonableness; and if he will make a statement. (264235)

[holding answer 23 March 2009]: Under the Consumer Credit Act 1974, if a business wishes to be involved in consumer lending or related credit activities, including the collection of third party consumer debts, it must have a consumer credit licence. The Office of Fair Trading considers the fitness of businesses who apply for a licence and continues to monitor the fitness and conduct of those who are licensed.

The Office of Fair Trading debt collection guidance sets out the type of behaviour it considers to fall within the category of unfair business practices which will call into question fitness to be given or retain a consumer credit licence. The guidance applies to all consumer credit licence holders including lenders and debt collectors. It also makes clear that if consumer credit licence holders do business with third parties engaged in unfair business practices, then their own fitness will be called into question.

The Office of Fair Trading would consider any evidence it receives of consumer credit licence holders failing to adhere to its guidance and has a range of measures that can be applied against such businesses up to and including revocation of the licence. However, any action taken needs to be both evidence based and proportionate to the identified misconduct.

In April 2008 the Office of Fair Trading received new powers granted to it under the Consumer Credit Act 2006 and since then has issued warnings to 13 companies telling them to take steps to improve their debt collection practices. Most recently the Office of Fair Trading has taken formal action by imposing specific requirements on 1st Credit Limited to improve some of its debt collection processes and procedures.

Details of all businesses subject to requirements can be found on the consumer credit register at: