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The Holland Law Firm, P.C.

Criminal Records Identity Theft – What Does it Entail?

What Should a Debt Collector Do When Calling a Vulnerable Consumer?

A study by British industry groups and academics recently set out best practices for debt collectors dealing with so-call vulnerable consumers. InsideARM, a US debt collectors’ trade publication has taken interest and encourages senior management to read it. Among the studies’ key findings were:

  1. 1 in 4 frontline debt collectors spoke to at least one consumer they “seriously believed” might commit suicide.
  2. Debt collectors need training concerning addiction and terminal illness – areas they (understandably) find difficult to discuss with consumers.
  3. Debt collecting businesses need to provide their staff with more support in identifying vulnerable consumers
  4. Ad hoc approaches to vulnerable consumers – such as temporarily ceasing collection to give the customer “breathing space” are not enough.

Vulnerability basically means that someone is “especially susceptible to detriment”. The term is officially defined by the Financial Conduct Authority. Detriment means more than just losing money – it includes physical self-harm, impaired decision making, being unable to seek help or advice, being treated unfairly and having legal rights violated. The concept covers more than just addiction or mental health problems – but also everyday circumstances that make people desperate. One of the examples the report gives is:

Kurum left his job due to illness and his benefit application has just been rejected, which is a shock. Kurum is tempted to take out a high-cost loan to pay his rent, but his emotional state means he may not be able to weigh-up the benefits and costs of taking this approach.

The report is a worthwhile read for consumer advocates as well as debt collectors. Although the circumstances that create vulnerability in the UK are different, the underlying lessons are likely the same.

The report also contains data that should shock and practices debt collectors should be following. For example, the report notes that in 2010, an earlier study found that 20% of collection staff did not routinely note consumers mental health problems in the consumer’s file even when they found out about them, and 26% didn’t ask how those problems would affect the consumer’s ability to pay. But after using one of the report’s many acronym-labelled protocols – TEXAS – improved the situation a lot. essentially means saying “thanks” to the consumer for disclosing the problem, explaining and obtaining consent to record the information, asking follow-up questions and pointing the consumer to other places to get help.

However, its worth noting that the generally rosy picture the report paints of a collection industry trying to do better, with numerous case studies from prominent debt collectors and banks is not the only picture of debt collection in the UK. The industry’s routine failures are catalogued in Financial Services Ombudsman’s published decisions. Collectors in the UK still do bad things – which the report addresses only obliquely. For example, Mrs A received collection attempts from an auto-finance company in relation to her late father’s debt when she didn’t represent the estate. That’s a familiar Fair Debt Collection Practices Act violation in the US. Mr. J, who suffered from mental health problems was left “to do all the running” with his bank, which eventually sold an overdrawn account to a debt buyer. Other classics of bad debt collection can be found there too: mistaken identity, attempts to collect statute barred debt and debts already paid.

The Report contains some useful tools and guidance, but it’s no panacea and does not directly address many routine failings in debt collection practice that appear to be universal.