Merchants of Misery: Debt collection is one of the UK's fastest-growing industries
Agencies pursue 20 million cases a year and resort to underhand (yet often legal) tactics. Now, a change to the law will make their business even easier. Jonathan Owen and Ian Griggs report
Sunday 17 February 2008
Debt collection agencies and bailiffs are raking in unprecedented sums from Britain's growing mountain of personal finance misery, an
Independent on Sunday investigation has found. Last year the agencies and bailiffs pursued no fewer than 20 million cases and the methods they used to squeeze money from people are so aggressive that experts ranging from the Citizens' Advice Bureau (CAB) to members of the House of Lords are now calling for legislation to curb these excesses.
A growing army of thousands of "debt chasers" is making millions from the misery of Britons who have spent years spending above their means, in what campaigners have slammed as "legalised profiteering".
Personal debt is at a record high of £1.4 trillion, averaging £29,684 for every adult in the country. And people now face the possibility of bailiffs being able to break into their homes and take possessions by force. The sweeping new powers will be outlined by the Government in May, when it publishes details of how a new Tribunals, Courts and Enforcement Act will work in practice. In a statement to the IoS, a Ministry of Justice (MoJ) spokesperson claimed that the new powers for forcing entry will be used only "as a last resort... in strictly controlled circumstances", and only "once full independent regulation of all private-sector bailiffs has been implemented". But it emerged last night that, despite bailiffs remaining unregulated, MoJ officials are proposing that they be allowed "to use reasonable force, restraint or violence against debtors thwarting the bailiff's seizure of their goods".
Although the Government pledged to regulate bailiffs a year ago, nothing has happened; the findings of a consultation on the issue that should have been published last July have yet to see the light of day. The CAB will meet policy advisers at the MoJ this week to discuss these new powers.
More than eight million Britons are in serious debt – a quarter of whom are struggling to make their repayments. Major lenders are taking legal action against people's assets, according to evidence from the Credit Management Research Centre at the University of Leeds, which warns that people's homes are also at risk.
Until now, Britain's credit boom has been sustained by rocketing house prices and a stable economy, but it has left many vulnerable to even a slight downturn in their fortunes. The Financial Services Authority (FSA) is warning of "a growing number of consumers experiencing debt-repayment problems in 2008", with mortgage repossessions and bankruptcies set to rise.
"Clearly the use of debt collection agents is on the increase because the big lenders are selling their debt to collection agents. The financial institutions want to get debt off their books quicker than they used to do," said Professor Nick Wilson, chair in credit management at the University of Leeds. "We're tending to see more court action to get charges made against people's properties and incomes."
Bailiffs are notorious for the methods some of them use. Tricks of the trade include charging extortionate fees for visits that never take place, intimidating people through aggressive behaviour, and lying about the extent of their powers to trick people into letting them into their homes or even into paying up on the spot.
But now, amid calls for tighter regulation, the powers of this controversial profession are to be widened. "It is legalised profiteering," said Lord Lucas of Crudwell and Dingwall, chairman of the Enforcement Law Reform Group, a body that campaigns for fair enforcement of debts. "It is very much like the systems of tax collections that one reads about in books from the Middle Ages. There is no effective control on what many of these bailiffs are charging."
Debt campaigners warn that government failure to regulate the debt sector could result in an escalation in confrontations with bailiffs and debt collection agencies. Peter Tutton, the CAB's national debt policy adviser, said: "We regularly see cases of bailiffs misrepresenting their powers, acting in an abusive or aggressive manner, pressurising people into paying lump sums they cannot afford, and imposing excessive fees that can drive already vulnerable people deeper into poverty and debt."
County court judgments reached 796,528 last year – a staggering increase of 48 per cent since 2004, when they stood at 538,383 – according to new figures provided to the IoS by the Registry Trust. And bankruptcy orders soared from fewer than 20,000 in 1998 to more than 62,000 in 2006.
Record numbers of people are flooding the CAB with desperate appeals for help with their debt disasters. Enquiries have shot up by 20 per cent in the past year alone, and the charity deals with 6,600 new debt problems every day. It claims that up to two-thirds of bailiffs could be guilty of harassment and intimidation, with 40 per cent accused of misleading people about their powers of entry.
Britain's debt culture has spawned a massive growth in the debt collection business. The Credit Services Association (CSA), which represents the majority of debt collection agencies, has seen its membership more than double in the past five years, from 134 in 2002 to 291 in 2007. Its members now deal with more than 20 million cases a year worth £15bn in total – triple the amount they dealt with in 2000. CSA members bought a record £6bn of debt last year, with major high street lenders such as Marks & Spencer, the Co-operative Bank and Lloyds TSB among those selling off their debts.
Owen James, managing director of Interim Justicia, a debt collection firm that has almost a million "customers" in Britain, and which had group profits of £37m in 2007, told the IoS: "We are looking forward to controlled sustainable growth... there's a lot of potential in this market."
Local authorities around the country raked in about £360m in legal fees over council tax bills alone in 2006, when four million liability orders were issued with fees ranging from £85 to £125 for each one. Debt counsellor Sheila Hardy said: "Council tax debts are a money-spinner for councils and it is an absolute scandal."
Writing in a recent industry newsletter, Steve Roberts, managing director of bailiff firm Ross & Roberts, warned that a trend for local authorities to insist that collection firms pay the council's outstanding debt before recovering the money and adding their cut would increase the pressure on some to "raise huge fictitious fees and do bogus calls".
Consumer organisations have reported incidents of fights involving bailiffs in people's homes, people being pushed over – in one case suffering a broken arm – or even having their children made to hand over pocket money to settle outstanding debts. Many people are subjected to inflated fees for phantom visits that never took place, as well as being lied to by bailiffs trying to trick their way into their homes.
And things are set to get much worse, according to the Conservative MP Henry Bellingham. "Already powers are being abused and that is going to get worse because we will have more and more people having their homes broken into by bailiffs," he warned. "This is happening as debt has increased to record levels. We have got a bailiff industry out there that's now going to be in possession of much greater powers of entry at a time when more people are going to be having problems with debt."
Vernon Phillips, director of the Enforcement Services Association, a trade body for bailiffs, responded last night: "Many of the complaints that we do receive are 'he said, she said' and there's no actual evidence." But he then admitted: "Bailiff firms are reasonable people and will acknowledge that one or two of their bailiffs might overstep the mark in their overzealous attempt to collect debts. There have been occasions in the past when members have been fined or expelled."
Attacking government suggestions that bailiffs could be regulated through the Security Industry Authority (SIA), he added: "The SIA is not a body that the industry has a great deal of faith in because basically it doesn't know what it is doing." Mr Phillips acknowledged there remained problems with some bailiffs. "Regulation would be good for the industry and drive out the minority of cowboy operators that give the majority a bad name."
The Credit Services Association (CSA), which represents debt collection agencies, is keen to play down the extent of the problems. The CSA gets hundreds of complaints each year, more than half relating to "intrusive methods" used by debt collectors. But Kurt Obermaier, its executive director, said: "There are bound to be people who aren't happy to be pursued for their debts and there are bound to be people who are complaining and trying to find ways of avoiding their responsibilities. I think that one has to accept that with the huge volume that we are dealing with there are from time to time situations that are not ideal, but as an industry we are committed to maintaining ever higher standards of practice."
'The strain got too much for her'
Beryl Brazier, a 61-year-old widow from Swadlincote, Derbyshire, drowned herself in a lake in April 2006. After her death her family realised that a mix-up had resulted in Mrs Brazier's being hounded by debt collectors chasing someone else's £17,500 debt.
Kim Brazier, her daughter-in-law, said: "The debt company has taken the life of a good woman who would still be here if the mistake hadn't been made. She did all the right things, but the letters kept coming and I think the strain got too much for her."
The Office of Fair Trading and the Information Commissioner have launched investigations into the activities of the debt companies involved in the case.
'I tried, but I couldn't keep him out'
Simon Cousins, 52, from Southend in Essex, suffers from chronic joint pain and has been unable to work since 1991.
He claims he was attacked by a bailiff chasing up a £1,400 council tax bill, who forced his way into his home last October. "I took advice from National Debtline, who told me that I did not legally have to allow the bailiff entry," he said. "When he called, I put my foot across the threshold and told him I was not going to grant him entry. He attacked me and I couldn't keep him out."
His wife called the police, who threatened Mr Cousins with arrest for breach of the peace. He said: "I was forced to pay the money there and then after having been assaulted."
'They were rude and inflexible'
Anthony Lewisohn, an 82-year-old retired judge from Cobham, Surrey, was pressured into parting with more than £500 by bailiffs who turned up on his doorstep and threatened to clamp and remove his car over a parking ticket. Letters had been sent to Mr Lewisohn's old address, so the visit came as a shock.
The former judge described the bailiffs as "thugs" and said that they could not give him proof of where or when he had committed an offence, or that letters asking for payment had even been sent to him. "They were rude and inflexible. It was very unpleasant," he said.
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