The Financial Ombudsman Service (FOS) has released its latest report which shows that it has dealt with around 3,300 inquiries about debt collection and took on over 1,000 new complaints for investigation in 2018. The complaints cover credit and consumer loans, such as mortgages, credit cards and personal or business loans. They don’t include household debts such as utilities or council tax, as these are outside of the FOS jurisdiction.

Alongside the figures, FOS is calling on debt collection firms to improve their practices for supporting vulnerable consumers. Of the complaints resolved by FOS  last year, one in five (21%) of the complaints were about whether the consumer was being asked for the right amount of money. 13% were about customer service issues, including being contacted excessively, and 13% were where the customer told us that the debt being chased didn’t belong to them.

However, several instances of good practice from business also emerged from the research. Some examples were:

  • Most businesses were flexible in terms of how much they were prepared to accept, and if it became clear that the consumer would never be in a position to pay off the debt, it was generally written off.
  • Most businesses had references to debt charities in their letters, although sometimes this was in small print or at the bottom of the letter.
  • Businesses generally followed recognised credit industry good practice when collecting debts.

Caroline Wayman, Chief Ombudsman and Chief Executive . of FOS, said, “In the past three years we have investigated thousands of complaints from consumers about debt collection companies. These complaints cover a wide range of issues, including aggressive customer service tactics, disputes about the size of the debt, breaches of confidentiality and failure to carry out instructions.”

“We have seen cases where a lack of empathy or flexibility from businesses can create more problems for people who are struggling, and who may be in vulnerable circumstances. We would encourage anyone who has a dispute with a debt collection company to contact us. In our research we did see examples of good practice from companies, and we would encourage all debt collection companies to learn from and follow industry good practice.”

In response to the Financial Ombudsman Service’s quarterly update on debt collection figures, Gillian Guy, Chief Executive of Citizens Advice, said “While concerning, these figures show the steps that can be taken to address problems in a regulated sector.”

“But when people have household bill debts pursued by bailiffs, for example, council tax or energy, they lack the same level of protection. Bailiffs are breaking rules designed to protect those who’re struggling and this causes stress, anxiety and further financial harm.”

“The Ministry of Justice have the evidence in front of them to establish a bailiff regulator. It now needs to follow through. An independent complaints process must also be introduced, like in the financial services sector, so bailiff complaints can be reviewed independently of the industry.”

Citizens Advice says that since 2014, it has been more common for people to come to Citizens Advice for help with household bill debts – such as council tax – than with problems related to consumer credit debts.

Citizens Advice figures show bailiffs broke rules designed to help people who’re struggling, 850,000 times in the past two years.

The lack of an effective complaints system means bailiffs are not held to account. Its analysis of YouGov polling also shows that 72% of people who experience a bailiff breaking the rules do not complain at all because:

  • It is unclear how to make a complaint
  • The pressure of bailiff enforcement action puts people off complaining
  • There is a lack of faith in the process

Figures obtained by Citizens Advice from the Ministry of Justice also show just 56 complaints were made through a court-based process introduced as part of the bailiff reforms in 2014.

Caroline Siarkiewicz, Director at the Single Financial Guidance Body and debt advice expert said “We know that poor debt collection practices can have a detrimental impact on people who are in financial difficulty, and these new figures show that there is room for improvement amongst creditors when it comes to supporting some of their most vulnerable customers. With over 8.3 million overindebted people in the UK, it is more important than ever that the sector engages in progressive methods of recovering debt to improve outcomes for these customers.”

“We are pleased to hear that some creditors are already engaging in best practice methods. This aligns with the standards outlined in the Money Advice Service toolkit for creditors which outlines seven steps to improved collaboration with debt advice agencies, and better support of customers in financial difficulty.”

The debt collection figures were published alongside data on all complaints handled by our service in quarter three of the 2018/19 financial year. The full figures are available in the latest edition of ombudsman news.