Lenders have been told by the Office of Fair Trading (OFT) not to pursue customers for debts in courts outside of their home jurisdiction.
The warning came as a result of Creation Consumer Finance, which supplies loans through retailers and motor dealers, being found to have pursued debtors resident in Scotland through the English court system. The OFT described this practice as "unfair because the unfamiliar law and procedure involved in a court claim in a different jurisdiction, and any associated travel costs, may deter consumers from defending such action".
The OFT added that to pursue someone in this way was a clear breach of its guidance on debt collection and that lenders would be deemed responsible for such a breach even when it was carried out by a third party firm such as a firm of bailiffs.
"Issuing proceedings in a different jurisdiction is clearly unacceptable and lenders should take heed that the OFT will act to prevent this practice," said Ray Watson, OFT director of consumer credit. "Lenders must also be aware that they are responsible for the actions of third parties acting on their behalf."
In response, Creation Consumer Finance promised to end this practice and also imposed more stringent monitoring of its debt collection arm.