Banks Never Learn
This has been going on for quite a while but when I was handed this letter recently it reminded me to write about it. And now that Myvesta has launched our new legal protection plan for consumers in our debt management programme, we'll take action on this and bring it to the attention of the Office of Fair Trading as well.
HFC Bank, part of HSBC, is sending letters to consumers with debt problems and steering them towards specific assistance organisations. Now, on face value, that does not seem so unusual but there is more to the story.
The letter states “We have received a payment proposal from a Debt Management Company on your behalf. At this moment in time we cannot accept the proposed amount and would urge you to call us immediately to advise and assist you personally.” Yea, read that last bit as “to get around the third party you chose to professionally represent you in this matter.”
OK, that seems innocent enough but the letter seems like a clear violation of the OFT Debt Collection guidelines.
The OFT guidelines have a section titled Physical/psychological harassment and the very first item listed in that section states “Putting pressure on debtors or third parties is considered to be oppressive.” The guidelines also state that “pressurising debtors to pay in full, in unreasonably large instalments, or to increase payments when they are unable to do so” is not kosher. And by HFC Bank stating that the proposed amount is not sufficient and they want a larger amount, even after the amount proposed is based on what the debtor can reasonably afford, is certainly a situation which falls under that guidance.
So let’s move on to look at the next section of the very same OFT guidelines titled Deceptive and/or unfair methods. In this section the wording could not be any more clearly spelled out for creditors when it says
“Examples of unfair practices are as follows:
C: refusing to deal with appointed or authorised third parties, such as Citizens Advice Bureaux, independent advice centres or money advisers,
D: contacting debtors directly and bypassing their appointed representatives
E: operating a policy, without reason, of refusing to negotiate with debt management companies"
Also in these very same Office of Fair Trading guidelines it states that it is not appropriate to leave out or present information in such a way that it creates a false or misleading impression or exploits the debtors’ lack of knowledge. I’ll get to that more in a moment.
The letter also states “We remain the only party authorised to accept reduced payments and future payment plans” This is false and misleading and just not true as the court and a judge can rule on a repayment plan in a Count Court Judgement or Time Order for example.
Now here is where it really gets interesting. You see the letter goes on to say, “We and other creditors are able to offer you help and advice. We also recommend the Consumer Counselling Service and Citizens Advice Bureau who offer their services for free.”
Now look HFC Bank, Ltd., let’s get honest here, it certainly appears that your intention here is to steer the consumer towards “Consumer Counselling Service”, a Debt Management Company, rather than allow the debtor to seek out and rely upon a third party group that is independent and they feel comfortable working with.
Since HFC pays “Consumer Counselling Service” a percentage of the debt they collect from the consumers and return to HFC Bank in a debt management plan (DMP), it seems like HFC and HSBC are doing nothing more here that purposefully and intentionally steering consumers to their paid debt collection representatives at “Consumer Counselling Service” and certainly not being open about the relationship between them.
So what HFC bank labels as "free service", is also misleading, the consumer is certainly paying a fee by being directed to a representative that may not be impartial given the income relationship between Consumer Counselling Service and HFC Bank/HSBC.
Seems like an intentional obfuscation or smoke screen to me.
I wonder if people would be better informed if the letter was changed from
“We also recommend the Consumer Counselling Service and Citizens Advice Bureau who offer their services for free”
to
“We also recommend the Consumer Counselling Service, whom we pay a percentage of the debt as a fee based on what they collect from you and return to us, and Citizens Advice Bureau, who does offer free debt advice but does not operate a debt management plan service.” In essence what they have done here is pretend to give the consumer the choice of two different apples but really given them one apple and one orange.
And to be transparent they’ll have to add another sentence to help educate consumers by saying “You should be aware that since Consumer Counselling Service is paid based on the amount of money they collect from you, you cannot be guaranteed that their services are without influence, conflict of interest or independent.”
Would you agree that the HFC Bank letter certainly does create a false or misleading impression or exploits the debtors’ lack of knowledge since it fails to fully disclose the business relationship between HFC Bank and “Consumer Counselling Service”?
The good news here is that since this client is a part of the Myvesta DMP that includes legal protection services, I’m giving this letter to the solicitor now defending this client against unreasonable and unfair creditor activities and I'm writing a letter to the OFT.
Let’s see what happens next.
Update: I have written letters to Consumer Protection Service, Financial Services Authority and the Office of Fair Trading about this. I'll keep you posted on the responses.
HFC Bank, part of HSBC, is sending letters to consumers with debt problems and steering them towards specific assistance organisations. Now, on face value, that does not seem so unusual but there is more to the story.
The letter states “We have received a payment proposal from a Debt Management Company on your behalf. At this moment in time we cannot accept the proposed amount and would urge you to call us immediately to advise and assist you personally.” Yea, read that last bit as “to get around the third party you chose to professionally represent you in this matter.”
OK, that seems innocent enough but the letter seems like a clear violation of the OFT Debt Collection guidelines.
The OFT guidelines have a section titled Physical/psychological harassment and the very first item listed in that section states “Putting pressure on debtors or third parties is considered to be oppressive.” The guidelines also state that “pressurising debtors to pay in full, in unreasonably large instalments, or to increase payments when they are unable to do so” is not kosher. And by HFC Bank stating that the proposed amount is not sufficient and they want a larger amount, even after the amount proposed is based on what the debtor can reasonably afford, is certainly a situation which falls under that guidance.
So let’s move on to look at the next section of the very same OFT guidelines titled Deceptive and/or unfair methods. In this section the wording could not be any more clearly spelled out for creditors when it says
“Examples of unfair practices are as follows:
C: refusing to deal with appointed or authorised third parties, such as Citizens Advice Bureaux, independent advice centres or money advisers,
D: contacting debtors directly and bypassing their appointed representatives
E: operating a policy, without reason, of refusing to negotiate with debt management companies"
Also in these very same Office of Fair Trading guidelines it states that it is not appropriate to leave out or present information in such a way that it creates a false or misleading impression or exploits the debtors’ lack of knowledge. I’ll get to that more in a moment.
The letter also states “We remain the only party authorised to accept reduced payments and future payment plans” This is false and misleading and just not true as the court and a judge can rule on a repayment plan in a Count Court Judgement or Time Order for example.
Now here is where it really gets interesting. You see the letter goes on to say, “We and other creditors are able to offer you help and advice. We also recommend the Consumer Counselling Service and Citizens Advice Bureau who offer their services for free.”
Now look HFC Bank, Ltd., let’s get honest here, it certainly appears that your intention here is to steer the consumer towards “Consumer Counselling Service”, a Debt Management Company, rather than allow the debtor to seek out and rely upon a third party group that is independent and they feel comfortable working with.
Since HFC pays “Consumer Counselling Service” a percentage of the debt they collect from the consumers and return to HFC Bank in a debt management plan (DMP), it seems like HFC and HSBC are doing nothing more here that purposefully and intentionally steering consumers to their paid debt collection representatives at “Consumer Counselling Service” and certainly not being open about the relationship between them.
So what HFC bank labels as "free service", is also misleading, the consumer is certainly paying a fee by being directed to a representative that may not be impartial given the income relationship between Consumer Counselling Service and HFC Bank/HSBC.
Seems like an intentional obfuscation or smoke screen to me.
I wonder if people would be better informed if the letter was changed from
“We also recommend the Consumer Counselling Service and Citizens Advice Bureau who offer their services for free”
to
“We also recommend the Consumer Counselling Service, whom we pay a percentage of the debt as a fee based on what they collect from you and return to us, and Citizens Advice Bureau, who does offer free debt advice but does not operate a debt management plan service.” In essence what they have done here is pretend to give the consumer the choice of two different apples but really given them one apple and one orange.
And to be transparent they’ll have to add another sentence to help educate consumers by saying “You should be aware that since Consumer Counselling Service is paid based on the amount of money they collect from you, you cannot be guaranteed that their services are without influence, conflict of interest or independent.”
Would you agree that the HFC Bank letter certainly does create a false or misleading impression or exploits the debtors’ lack of knowledge since it fails to fully disclose the business relationship between HFC Bank and “Consumer Counselling Service”?
The good news here is that since this client is a part of the Myvesta DMP that includes legal protection services, I’m giving this letter to the solicitor now defending this client against unreasonable and unfair creditor activities and I'm writing a letter to the OFT.
Let’s see what happens next.
Update: I have written letters to Consumer Protection Service, Financial Services Authority and the Office of Fair Trading about this. I'll keep you posted on the responses.
