Credit industry urged to improve collections practice

AdviceUK, Citizens Advice, the Institute of Money Advisers and the Money Advice Trust have called on creditors to improve debt collection practices and help people make sustainable repayment arrangements. A new report, 'Do the Right Thing' calls on creditors to learn from best practice and:

• Set the right organisational culture
• Achieve the right motivation for debt collection staff
• Develop clear and encouraging communications
• Provide information and support
• Be willing and able to maintain and develop best practice

Alex MacDermott, Creditor liaison policy officer at Citizens Advice and report author argues:

"Bad debt collection practices can have dire consequences and often make things worse by pressurising the person in debt to pay more than they can afford. Homes, possessions and essential services can be lost where people are persuaded to make debt repayments before paying for everyday essentials. Relationships can break down, and the health and wellbeing of families and individuals can suffer.

However we found...that there are some clear steps creditors can take that will benefit everyone concerned, not just those in debt: advice agencies will be able to deal with cases quickly and efficiently and ultimately help more people; and creditors will receive sustainable repayments and waste less time and resources chasing money people simply do not have .We want to see creditors cooperate and do the right thing to help people overcome their debt problems and become valued customers once again.

The report is available from www.citizensadvice.org.uk/press_20100224a

Citizens Advice enquiries on how more people struggling with household bills

The latest quarterly figures published by Citizens Advice show that the total problem count for the three months October - December 2009 reached 1.7 million, up 20% on the same period the previous year. Debt problems rose by 24% and enquiries about welfare benefits were up by 22% compared with the same quarter the year before. This comes on top of earlier sharp increases seen since the start of the recession in April 2008. The details indicate that more people are experiencing problems with essential household payments:

• fuel debts up 32%
• water debts up 27%
• phone debts up 30%
• rent arrears to private landlords up 25%
• council tax debts up 18%

Enquiries about job seekers allowance were up by a third (33%) and mortgage arrears problems were up 14%, but in both cases the rate of increase has slowed after peaking in the first three months of 2009.

Ombudsman reports on complaints against financial institutions

The Financial Ombudsman Service has released its second six-monthly set of complaints data relating to individual financial businesses, including banks, insurance companies and investment firms. A total of 82,136 new complaints were received between 1 July and 31 December 2009, an increase of 18% on the first six months of the year. Over half of all new cases were made against just five financial services groups. The Ombudsman notes that this is likely to be because the number of complaints reflects the size of these firms (Lloyds Bank and Barclays Bank each received just short of 10,000 complaints each and other elements of their groups received further complaints on top of these figures). However, experts consulted by the ombudsman were unable to agree how size (or market share) should be taken into account when comparing complaints statistics across the financial services sector.

The data also shows that in the second half of 2009 the ombudsman service upheld an average of 53% of complaints in favour of consumers, compared to 59% in the first half of the year and a recent article in the Ombudsman's newsletter indicates that the trend towards more complaints is expected to continue. For the next financial year, 2010/11, the Ombudsman's central assumption is for a further increase in new cases to 190,000 although they have also planned for a more pessimistic assumption of 228,000 new cases and a more optimistic assumption of 165,000 new cases. The FSA has also announced that it will be looking into the complaints handling procedures of the largest firms

Details of the individual breakdown of complaints by firm are available from the Ombsudsman website here