The impact of the Office of Fair Trading (OFT) press release from 22 November 2010 is still being felt, as both lenders and DCAs alike review their current strategies, particularly around the use of Charging Orders as a preferred enforcement method.
Whilst clients understandably desire to avoid any criticism of the approach taken in the recovery of debts, lenders do have the right to take reasonable action where there is a lack of co-operation or inability to pay. The County Court Users Association (CCUA) issued a statement to this effect shortly after the press release, emphasising this perspective.
“The CCUA believes it is the right of a creditor with a legitimate judgment to be able to enforce or secure it with the appropriate option, and to restrict this is denying access to justice. The question of proportionality should not apply where a judgment is due and owing, and to limit the options available to a creditor is unacceptable. It is the judiciary who ratify the decision not the creditor as to whether a charging order is granted or not.”
Although this viewpoint is echoed by many, companies should be satisfied that the action they are taking is “proportionate” to the size of the debt. You may ask how is proportionality determined. There isn’t a simple formula but consideration should be given to the approach taken to recover debts under £1000, which appear to generate the most concern.
Some of the criticism levelled has been directed at the apparent lack of consideration being given to each individual’s circumstances. It’s essential to document the thought process prior to proceeding with an enforcement action – especially where this could result in obtaining a Charging Order, given that this could potentially lead to Order for Sale.
Standard letters were also subject to scrutiny as some of the findings confirm. It is good practice to regularly review all standard letters having regard for the OFT’s Debt Collection Guidance. The Credit Services Association has recently produced a guidance document in association with the OFT around the use, content and format of standard debt collection letters. Whilst this is repetition of messages, the document does offer further clarity and it is worth reviewing standard letters with this guidance in mind.
Mark Higgins, Partner