Debt or Harassement ?

Question?

What is the only single difference between an authorised lender and a predatory loan shark charging extortionate interest rates and engaging in aggressive and intimidating debt recover, and an authorise lender?

Answer:

A consumer credit licence!

If I were to choose one area which is a paradigm of the gulf which exists between legal theory as taught in any University Law School and that which occurs outside in the real world, then one could not do better that to choose this one area of debt enforcement.

English law is replete with statutory provisions, and codes of conduct designed to protect debtors from harassment. Unlawful harassment of a debtor, malicious communication, protection from harassment, withdrawal or non-renewal of a consumer credit licence etc ad nausium. No-one can criticise Parliament nor our courts from failing to protect the vulnerable - at least on paper!

The difficulty is that regardless of what the law says, such rights and remedies are simply useless paper remedies without the ability to vindicate them before the court.

Corporations simply ignore them with impunity since the poor have no access to legal aid, they are unable to afford the court fees to bring or defend an action and often, the sums are so small (in relative terms) that it is simply not worth the financial return for a contingency-fee lawyer to represent the individual being harassed by a creditor.

Add to this a weak regulatory regime, an unwillingness by the enforcement agencies such as ‘cash-strapped local authority trading standards and an Office of Fair Trading who very rarely use the full range of powers available to them to remove consumer credit licences from anyone other than the odd small fry lender; and you have a situation in which for the poor at least, corporations may harass as much as they want to with little chance of any serious sanction for doing so.

Those comfortably off, on the other hand may avail themselves of the law. An example is the recent case of Ferguson v British Gas Trading [2009] EWCA Civ 46.

Lisa Ferguson was pursued by British Gas for money she did not owe. British Gas employed some fairly reprehensible tactics to secure payment, including threatening her with costs. Mrs Ferguson was fortunate enough to have a well paid job, a home with equity in it and savings allowing her access to the court to use section 1 Protection from Harassment Act 1997 The Court of Appeal deprecated the behaviour of British Gas. Sedley LJ was somewhat scathing at para 53 of his judgement when he said:

“it ought not to be left to hardy individuals to put their savings and homes at risk by suing. The primary responsibility should rest upon local public authorities which possess the means and the statutory powers to bring alleged harassers, however impersonal and powerful, before the local justices.”

Unfortuntely, we see little evidence that local authorities or trading standards intervening to bring corporations before the court. Indeed, in 2005 it was left to a young law student, Stephen Horne from Southampton University to single-handedly take on the Abbey National bank over unlawful bank charges using the Unfair Terms in Consumer Contract Regulations 1999. It was only when he won his case and the media frenzy that followed it that embarassed the OFT sufficiently into bringing a test case against several powerful banks to determine whether the OFT had the right to set charges.

What it illustrates more than anything else is that a powerful bank with expensive lawyers may simply ignore the law relating to contractual terms and use its deep pockets to defeat all but the most knowledgeable, determined, or those who are prepared to risk all to .vindicate their rights with little or no intervention from the agencies whose job it is to police the activities of those who would act unconscionably.

Debt collection in this country is virtually beyond the reach of the law because those who need its protection are unable to access it to invoke the statutory protection the law provides.

The activities of debt collecting agencies operating in the Kingdom was addressed by Channel 4 in their ‘Dispaches’ documentary programme Undercover Debt Collector” broadcast on 20 July 2009 and available to watch on ‘More 4’ until 19 August 2009.

A recent ararticle from Johann Hari: Cruel and out of control: the new face of debt collecting is reported in The Independent 14 August 2009.

Personal bankruptcy is often the last resort of the desparate. Once an order is made and published in the London Gazette and the Insolvency Service Website, the harassment usually ceases. However, even this remedy is beyond the reach of the impecunious since to obtain an order, the impecunious applicant must find the sum of £500 to pay for it!

In answer to the question, a lawful and reasonable demand for debt ceases to become so once it enters the area of Harassment a term very widely defined in, for example the Protection from Harassment Act 1997 – if you are rich enough to access it or if you can find a contingency fee lawyer who can be bothered to take it on, but one thing is certain, there exists little practical protection available to the poor and vulnerable from predatory and aggressive agencies engaged in unlawful debt collecting.