Falling Into Debt: Know Your Rights

As we are presently emerging from a deep recession many of us are really feeling the pinch when it comes to our finances. What happens if we can’t keep up payments on debts we owe? Knowing exactly what to expect from creditors when you do fall into debt is knowledge well worth having. What can creditors do to collect the debt and what are they not allowed to do. What are our rights and what process should creditors follow when pursuing a borrower. Here we take a look at what procedures must be followed by creditors and debtors in order to reach an amicable solution.

Your Rights

Creditors are allowed to contact people who have fallen behind with payments by letter, telephone or home visit but they must act within the law and follow guidelines and rules set out by the Financial Conduct Authority.  Know your rights! Unfair practices include

  • Pressurising you to borrow additional funds to cover a debt
  • They may not discuss your debt with family friends or your employer
  • Call you at your place of employment unless you give them permission
  • They must not refuse to speak to advice agencies who you engage for help
  • Add unreasonable charges to your debt
  • Carry on calling you when the debt is in dispute
  • Pretend to have legal powers they do not have

The FCA is very strict with creditors when it comes to sticking to the rules, while if they find creditors in breach of these rules they can

  • Issue a warning
  • Levy a fine
  • Remove the creditor’s license

Harassment

There are a number of things that would count as harassment by a creditor, while if you feel you are being harassed there are a number of things you can do. Some of the types of behaviour that count as harassment include

  • Contacting you late at night, very early in the morning or multiple times a day
  • Implying that not paying your debt is a criminal offence
  • Making you think that you are going to be taken to court when no action is planned
  • Contacting you on social media websites
  • Using multiple debt collectors to hound you for the money
  • Not informing you that your debt has been passed on to a debt recovery agency
  • Pressuring you to make larger instalment payments than you can afford
  • Making verbal or physical threats or embarrassing you in public places
  • Making known your debt to third parties such as family friends or neighbours
  • Claiming to work for the court or bailiffs office falsely
  • Implying that your home can be taken without a court order

Sending letters, reminders or demands for payment does not count as harassment, nor does telephoning to do the same. Visiting your home at a reasonable hour or taking court action against you also does not come under the harassment banner.

How to Deal With Harassment

In the first instance make sure that you know who is collecting the debt. You must keep records of harassment with dates and times logged. Make a note of who called you and exactly what they said. Keep all letters and documents you have been sent, while it is handy to have witnesses such as family members who were there when you were being harassed or neighbours. Once you have all the evidence you must complain to the creditor or to a professional body such as Citizens Advice Bureau or the FCA.

What Creditors Can Do

There are a number of things creditors are allowed to do as long as they stay within the rules set out by the FCA. These include

Charge Interest

If you go over your borrowing limit or fall behind on payments creditors may charge further interest. These further charges must be set out in your terms and conditions that were issued when you took on the debt. No further interest can be added if not written into the T & C’s. If you feel you have been charged more than is in the T & C’s you can complain and ask for a refund. Your debt may be passed onto a debt collection agency if you do not pay.

Telephone

Creditors may telephone you to discuss your debt but if you find this uncomfortable or upsetting you can request to be contacted by letter or email. You do not have to speak on the telephone if you don’t wish to.

Home Visits

Making home visits costs a lot of money therefore it is not often creditors take this course of action. If you receive a visit from a debt collector you are not obliged to let them into your home as they have no legal right to gain entry. The creditor may threaten to send a debt collector but in any case they too are not entitled to enter your property.

If a debt collector calls you do not have to speak to them. A debt collector cannot

  • Act in a manner that intimidates or use violence
  • Refuse to leave when asked
  • Enter your home or remove any of your property
  • Involve any of your family or friends and neighbours

Letters

Creditors can write to you if you fall behind with payments. They may state what possible steps will be taken if you fail to pay but have to stick to the FCA rules. You must always open and read letters you receive as you are obliged to act on them within a set timescale. Some letters are sent with the intention of putting pressure on you to pay, while others are to inform you that you are being taken to court or that your debt has been passed on to a debt collection agency. Either way you must deal with correspondence. Creditors are under no obligation to send their correspondence by recorded delivery post.

If you think you have been unfairly treated you are entitled to complain. Say for instance you settled an account and paid off the balance and then moved house. Letters have been sent to your old address to say you still owe money. You may make a complaint to the creditor.

Making a Complaint

Write to the creditor telling them why you feel unfairly treated. Tell them what steps you would like them to take in order to put things right. Inform the creditor if they do not deal with your complaint promptly you will contact the Financial Ombudsman. Ask the creditor to send you a copy of their complaints procedure so you can judge how they will deal with your complaint plus how long it should take them.

Request the creditor to halt any further action until they have dealt with your complaint and request that replies be put in writing. In order to avoid the “we didn’t receive your complaint letter” scenario sent your correspondence by recorded delivery. Always keep copies of letter you send, while also keeping copies of replies received too. If your debt has been passed on to a debt collection agency it is the agency you need to contact as you will probably find that the original creditor will no longer discuss the debt with you.