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New debt guidelines welcomed by CAS

10 Mar 2011

Citizens Advice Scotland have backed the Office of Fair Trading’s Guidance on Debt Collection – which has been opened for consultation today.

CAS Chief Executive Lucy McTernan said,

“Debt remains one of the biggest issues brought to the CAB by members of the public. Last year Scotland’s CAB advisers helped people with over 132,000 debt cases. That’s a quarter of all cases we dealt with. There are too many Scots who are drowning in debt, and the problem has been getting worse in recent years.

“Our figures show that across Scotland, debt levels increased by 50% over the period of the recession, with the average debt reaching more than £20,000 among our clients. The number of young people in debt is particularly worrying. Four out of five young Scots have been in debt by the age of 21, and that a third have owed more than £5,000.

“The OFT guidelines address in particular the issue of unfair collection practices. Unfortunately, we have seen many cases of people being contacted repeatedly and aggressively. Such actions are common, not just from loan sharks but from banks and credit card companies as well – some of whom threaten debtors with actions that are in fact illegal under Scots law.” (see sample of cases described below).

“This sort of harassment and intimidation makes debt even more of a nightmare for anyone caught up in it. Debt can quickly spiral out of control, as people take out one loan to pay off another. It causes stress and ill health, as well as destroying peoples’ finances. Over 40% of CAB debt clients have told us they have gone without food or fuel in order to try and pay off their debts, because of the way they are being pressurised by their creditors.

“Nobody should be in that position. That’s why we back the OFT guidance, which is very basic, and sets out simple measures that any organisation can follow which will help ensure that collection practices are fair and treat people with dignity. We will be presenting our own evidence to the consultation, and we would urge that government be ready to take the issue seriously and enforce any regulations that are necessary to make the industry fair.”

For more information, or to arrange interviews with CAB spokespeople, please contact Tony Hutson on 0131 550 1010 or 07774 751655.

ENDS

Case Studies

The cases below were all recorded by Scottish CAB advisers. They are a representative cross-section of the sorts of issues people face in terms of debt collection harassment/intimidation. (Other similar anonymous cases are available on request – but NB we do not currently have any case studies who are prepared to be named).

A West of Scotland CAB client received phone calls at all hours from his bank after falling into arrears. The client received calls into the evening and from 8am. His wife often took the calls and sometimes they were ‘silent’, but client checked and found they were from the bank. The CAB wrote to the bank complaining on behalf of the client. The reply stated that all customers who get into arrears receive phone calls like this, but the system is unable to cope with requests not to call at certain hours, and that some calls start out as silent as the operator can’t always respond immediately. These administration difficulties at the bank cause unfair stress and worry for these clients.

A North of Scotland CAB client receives frequent letters and late evening phone calls which is charged at £10 to £20 each time. The client claims to have repaid a total of £7,816 for a loan of £5,000, but charges and interests mean the client still owes £8,456. The client recently received a phone call from the creditor seeking answers to personal financial questions. The client is very distressed by the situation.

A West of Scotland CAB client had two representatives from a doorstep lender come into her living room asking for repayment of a debt. The client has mental health problems and has run up some debt as a result. The men came into her house without permission, which greatly upset the client.

Another West of Scotland CAB client received a letter from a debt recovery agency stating that unless a satisfactory agreement was reached the company would instruct bailiffs to enter the property with the intention of seizing goods to pay for the debt. This action is illegal in Scotland, although this was point was nowhere in evidence in the letter, and the client only discovered this when they visited the CAB to ask for help.

An East of Scotland CAB client was told by her credit card company that they would ‘send the bailiffs round’ if she did not increase her repayments. When she challenged them and said she did not think such practices were allowed in Scotland, the caller became ‘aggressive and insulting.’ The client said she has never felt very intimidated.

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