New Redress From Debt Harassment

Debt collectors who behave unreasonably to consumers will soon come under the watchful eye of the Financial Ombudsman Service.

If there's one thing people complain about most on our Dealing with Debt discussion board, it's the scare tactics that are sometimes used by debt collectors. It's no wonder many people hide their heads ostrich-like in the sand when they think someone's trying to put the frighteners on them.

It can be even worse when you're trying to co-operate by providing the debt collector with the relevant information about your finances and to pay what you can afford, only to find that they continue to hassle you for more money.

Debt collectors are licensed by the Office of Fair Trading, which has considerable powers when it comes to dealing with companies that overstep the mark. These powers include revoking their licence to trade, thus putting them out of business. However, the OFT has no powers to get you any redress personally if you are continually being harrassed by a debt collector who isn't following the rules.

From 6th April that will all change when the new Consumer Credit Act takes effect making the Financial Ombudsman Service responsible for dealing with complaints about debt collectors.

Under the new legislation, any organisation that is dependent on the Office of Fair Trading for a consumer credit licence must have a formal complaints procedure in place. If you feel you are being unfairly treated by a debt collector, first you should complain to them in writing. The company must acknowledge your complaint within five working days, provide you with a progress report within four weeks followed by a final report eight weeks later stating whether they feel you have a valid complaint or not and explaining why.

If the company fails to comply with any part of the complaints procedure or your complaint remains unresolved, then you can complain to the Financial Ombudsman, which will in certain circumstances be able to order the company to pay compensation.

Now while this may not sound terribly exciting, the interesting part is that the new regulations are designed to hit these companies where it hurts if they don't change their behaviour. A company will be allowed two free investigations a year but every subsequent complaint in that year will cost the company £400 per complaint whether or not they're in the right or wrong.

As the Fool's favourite debt collector (SON1C), who helps out on our Dealing with Debt board, puts it: "This means, that unless they have bottomless pockets, they are going to have to change their tactics and start listening to reason"!

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