Banks using Wonga-style debt collection tactics

Major high street banks are using Wonga-style debt collection tactics by sending customers letters chasing for payments seemingly from third-party firms.

Barclays, Lloyds Banking Group, Halifax, Royal Bank of Scotland and HSBC are among the banks that have sent customers letters that look like they are from unattached third-party firms when they are actually from their in-house legal departments or other subsidiaries.

According to This is Money, the letters give the impression that the debts have been passed onto third parties for collection.

Last week, payday lender Wonga was ordered to pay £2.6m to around 45,000 customers after the FCA uncovered misleading debt collection practices at the payday lender.

Wonga had sent letters from non-existent legal and debt collection firms to customers facing arrears on their accounts. The City of London police are investigating the matter.

Labour MP Stella Creasy told This is Money: “These letters seem to have been designed to frighten people into thinking that they are further along in the debt process than they are.

“At best, they are not being transparent, and at the worst they are being downright deceptive. It’s disgraceful.”

Barclays has been using the firm name Mercers Debt Collection; while Lloyds has been using Sechiari, Clarke and Mitchell Solicitors, an in-house legal department. Halifax has been using the name Blair, Oliver & Scott.

Barclays has reportedly stopped using the name this week, while Lloyds has reportedly decided to phase out the use of the name.

Mortgages for Business managing director David Whittaker says: “Clearly this problem is not isolated and we must expect the FCA to step in and add fines to the mix. This will not restore consumer confidence in financial institutions.”

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Comments
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  • John 4th July 2014 at 11:19 am

    Everybody has been doing it for years – especially local Parking cowboys (including Councils), Bailiffs, loan sharks and pre-Wonga payday lenders etc. Even HMRC debt collection contractors. Where have these people who are complaining about Wonga and the Banks etc been living for the past ten or twenty years.

  • Peter Turner 4th July 2014 at 10:40 am

    Nothing new. I remember seeing a bank do this as long ago as 1988.

  • Paul Woolley 4th July 2014 at 9:53 am

    A disgrace, of course but not a surprise.

  • Smithy0364 4th July 2014 at 9:00 am

    Bearing in mind the amount taxpayers paid in baling out Lloyds Bank, you’d have thought they might try and do a bit better than ‘phasing out over time’ something as underhand and deceptive as this.