This is our truth, tell us yours
The interweb has been having much fun with the idea that Wonga may have committed criminal offences in their debt collection practices.
Debt collection is a funny old world, full of weird phrases about things like ‘professional discourtesy’. It’s also hugely profitable, and opaque. The process between the debtor being unable to meet their commitments and the knock on the door is never as simple as it seems.
Many years ago I was a bag carrier for an inner-city debt collector. He had all the appropriate paperwork, and what seems today to be a fairly unique approach to debt collection. On the first day I walked behind him, we went to work via a wholesale stationers where he bought a box of cheap birthday and christmas cards for his regulars.
He was an old fashioned debt collector, willing to build a relationship with clients and collect small amounts regularly. He wasn’t ashamed to tell his bosses that a contact was hopeless, and he could point his regulars at other sources of credit if they needed them. Since he worked on a commission basis he was dependent on being able to collect as much as possible, and willing to wait if patience meant a long term income stream. He had no time for ideas of fairness or justice, but he was entirely predictable in the way he dealt with his clients.
Door to door debt collectors have changed. The industry was changing even when I first encountered the work, and learned about the highs and lows of poverty and debt. Pay day lenders then were companies above shops with a smell of stale cigarettes and old paperwork about them, or pawn brokers. Businesses like Wonga, with their assumptions about huge failure rates and their cavalier approach to customer churn hadn’t emerged, and would have seemed indistinguishable from loan sharking.
The only surprise about the Wonga story is that it has taken so long to come to public view. If you read the web forums used for advice by people in debt you’ll have known for quite some time that debt collection in the UK has become an industrialized business with debts being sold between companies as a matter of course.
The dodgy end of the debt selling business is exemplified by the trade in statute debarred debts. Broadly speaking, some consumer debts in the UK are debarred, by statute, from enforcement in the courts once six years has elapsed after the last contact between debtor and creditor. They are sold, for a minute fraction of their value, between firms whose modus operandi is to try and get creditors to admit they owe the debt, overriding the statute bar and making the debt live again. To do this they employ a huge range of tricks and deceipts.
Now, the story isn’t that people who collect debts have a defective moral compass. The story is that it’s been an open secret for years. I started representing clients at tribunals twenty years ago, and learned a lot about debt law from grateful clients who told me about all their other problems while I tried to make sure they got the benefits they were entitled to. From them I learned about the ways they exchanged information, the ways they spotted the fake names on letters, the recorded delivery letters that were just a subterfuge to get them to sign as if they’d acknowledged a debt.
If Wonga have broken the law then I’m willing to bet a dozen other agencies who deal in statute barred debts deserve to be investigated. Wonga simply became too obvious, but if you’ve done debt advice over the last twenty years you’ll know too much about the tactics of companies who see each debt as an opportunity for profit. They lie. They change names. They ignore statute law. They send text messages that imply you may be able to clear your debts without paying, and they use a plethora of made up names.
Now, there’s an issue of moral culpability here. Some debtors are not entirely honest, or committed to repaying as best they can, but that does not excuse the sharp practice and dishonesty that the companies who seek to enforce debts routinely practice. Consumer and debtor protection has become like parking fines, an issue that can be avoided at worst and, at best, completely ignored. The fact that Wonga have been referred to law while the companies who feature most often on the consumer forums haven’t should tell you all you need to know about the febrile environment in which lenders and debt collectors operate. Simply, they prey on people tooweak to even use the legal protections they enjoy.
The message to Ed Miliband is simple; kill this industry.
Make it a civil tort, justiciable in the county court, whatever the amount of the debt, to pursue a debt
i) when its statute barred
ii) when the alleged creditor does not hold a copy of the original agreement in the form that it was made, and / or
iii) When the creditor cannot demonstrate that they have sought to establish and maintain a relationship with the client, including offering terms when the creditor tells them they cannot make repayments.
Set the compensation at a simple level – 50% of the amount claimed. Introduce a defence that the creditor had sought to actively evade the debt. Simple.
If Labour is serious about social justice it can act to protect people when they are at their weakest and most vulnerable, and it can weed out the worst offenders.
A note here to banknote feminists. It may matter that Jane Austen is on the back of banknotes. It matters more that payday lenders and debt collectors love women customers who have children – they can’t run away or hide as easily. Ask any Provident collector and they’ll tell you that they regard single men who can flit easily as the worst risks; women with kids, often single mums, are shackled to their homes in a way that makes them easy prey for the financial predators who offer easy terms and a lifetime of small payments that start at less than a Jane Austen a week and add up to a lifetime of poverty.