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The Credit Services Association (CSA)
Blog: Bringing clarity to debt collection for customers: a debt adviser’s perspective
A Citizens Advice adviser, Sara Williams set up the Debt Camel website in 2013, where she blogs in a personal capacity about everything from mortgages to payday loan refunds. She will be sitting on a panel entitled ‘Regulation based on the consumer not the supplier’ at the UK Credit & Collections Conference (#ukccc) in September 2016.
Debt advice tends to focus on people who can't afford to pay their debts. Debt collection has the extra problem of distinguishing between "can't pays" and "won't pays". But many customers with old utility and mobile debts don't fit into either of these categories, because they didn't know the debt existed.
Some typical complaints
Here are a few recent Debt Camel readers' problems:
- "Energy company defaulted me after I moved in 2012. I didn’t know about the gas and electric debts. I paid in full when I found out in 2015. They won't delete the default."
- "I have a Default from a mobile company for £20 which drops off this year. Should I just wait for the default to drop off, or pay this £20? I don't know what it is for, they never contacted me about it."
- "Mobile firm has just added a default to my spotless credit file. My account with them was perfect for two years, however there was some confusion as to when the contract ended and I cancelled my Direct Debit so I ended up being one month late with my last payment. They have refused to change my default and say that it’s a fair reflection of how I managed my account, even after two years of paying on time."
- "I received a debt collection letter for a phone bill from 2010 for an address I have never lived at. All of my phone bills in 2010 were settled in full and they show on my credit file as closed with no problems. Debt collector wants me to prove where I lived. Obviously I don’t keep bills from six years ago and have moved four times since then."
- "I didn't realise I owed the water company any money when I moved. In my next property I was actually in credit with the same company. They have only just started reporting to a credit reference agency so the default date shows as 2016, even though I moved in 2014."
- "I have just applied for a mortgage and found a default on my credit file from a digital TV provider. I moved the month of the missing last payment and informed the firm of my new address. I have had a new account with them before the default was issued. No information regarding the missing payment was sent to this new address."
Mobile/phone/TV companies feature prominently, as the Citizens Advice report ‘Falling Behind: an assessment of debt collection practices in the mobile phone market’ highlighted, but many of the issues also apply to utility debts.
Ideas for improvement
Let's look at a few areas for improvement by creditors and debt collectors, which I hope to touch on at the UK Credit & Collections Conference. These won't just help the customers, they should also enable debts to be repaid sooner and more efficiently:
- Improving communication after a customer has moved. These problems seem likely to increase in future with people in their 20s and 30s finding it harder to buy a house or get a secure long-term tenancy. Creditors should send emails and texts about outstanding bills, not just letters to the old address. And send a further set of notifications before adding a default to someone's credit record. When a new customer joins you, take this as an opportunity to remind them to tell their previous supplier they have moved.
- Don't let telephone complaints lapse without a clear conclusion. Most companies want people to complain over the phone and that suits many customers too. But often the customer comes away thinking they have explained why they shouldn't have to pay the remainder of the contractual amount so if they don't hear anything they assume the debt has been written off. Whereas the company thinks they told the customer they had to pay. Instead telephone complaints should be followed up by letter, email, text or all three.
- Don't delay. The faster these issues are resolved the better. Years later it is hard to resolve billing disputes and old call recordings won’t be available.
- Use Plain English. If you are trying to collect money from someone who was not named on a bill, you need to explain very clearly why you are allowed to do this - how could a customer be expected to know the differences between liability to pay electricity and water debts? "Clear" here means clear to the customer, not clear to your in-house lawyer. If a mobile company lists the Ombudsman Services: Communications and the Financial Ombudsman on their website, give the customer a clue as to which will be relevant.
- Treat the customers fairly when it comes to defaults. If the customer says they paid the debt as soon as they found out about it and the rest of their credit record looks reasonable or even excellent, it seems unlikely they were trying to avoid paying this one debt. A default in this situation seems disproportionate and deleting it would be the fair thing to do. As one of the people above said, "I feel that the punishment does not reflect the crime."
The debt collection sector has been working in recent years to improve practices and it’s encouraging that the UK trade body, the Credit Services Association, is bringing together creditors, advisers and collectors at the conference to discuss how we can work together to improve things further.
Of course research from Citizens Advice and StepChange consistently shows that the creditors that customers find most difficult to deal with are HMRC, the DWP and local councils... but that would be a subject for a different article!
I look forward to discussing some of these issues with regulators and delegates face-to-face.