Debt collection agencies regularly harm consumers with their commercial practices. This has been one of the key findings of a study by the Netherlands Authority for Consumers and Markets (ACM). ACM has identified three problems:
- debt collection agencies confront consumers with wrongful claims;
- debt collection agencies confront consumers with wrongful costs, and their invoices are unclear;
- debt collection agencies put pressure on consumers in an unacceptable way to pay their debts.
ACM has found there are sufficient indications that these problems occur on a regular basis, caused by a large group of debt collection agencies. These problems often affect low-income individuals with relatively high debts. Such consumers are particularly vulnerable.
Both ACM and the Netherlands Authority for the Financial Markets (AFM) have enforcement powers to take action. Anita Vegter, Member of the Board of ACM, explains: “What we are seeing is that these problems are widespread, across the entire industry. ACM and AFM will join forces in order to tackle these problems effectively.”
What was the reason for conducting a study into debt collection?
ACM launched a study into the debt collection industry because consumers had reported problems to consumer information portal ConsuWijzer, and because these problems hurt consumer confidence considerably. Furthermore, most cases concern vulnerable consumers, and this topic has attracted a lot of attention from the public and lawmakers. In order to get a better picture of these problems, ACM has sat down with many parties involved. In addition, ACM had a survey carried out among consumers about their experiences with debt collection agencies.
ACM has looked into extrajudicial debt collection processes of firms that are aimed at collecting debts from consumers. The total amount of outstanding consumer debt in 2014 was estimated at EUR 5 billion.
What problems does ACM see?
The complaints received by ConsuWijzer often concern businesses that try to benefit from employing unfair commercial practices through debt collection processes. This might include unsolicited follow-up shipments. Such shipments are usually followed by wrongful claims and a debt collection process in which consumers feel pressured, as a result of which they decide to pay anyway.
Another finding was that debt collection agencies charge too high debt collection costs. In some cases, additional costs were even added to the debt collection costs. This is not allowed. Also, debt collection agencies often fail to specify their invoices. Consumers thus find it difficult to check the invoices themselves, or are even unable to do so at all. Considering the high number of debt collection processes each year and the total amount of outstanding consumer debt, the harm to consumers caused by this practice is substantial.
Exerting some pressure on consumers in order to urge them to pay their bills is inherent to this industry. However, this pressure cannot take on unacceptable forms. In 8 percent of the letters that ACM examined, debt collection agencies exerted unacceptable pressure, for example by threatening to exercise powers they do not even have such as seizures of bank accounts, or forced sales of household goods. As consumers are often not aware of their rights nor what powers debt collection agencies have, they feel pressured.
Who can handle these problems?
The debt collection agencies themselves and their trade association NVI are the ones to make the first move. In addition, ACM and AFM will join forces in order to deal with the identified problems as effectively as possible. In dealing with the misleading and aggressive practices of debt collection agencies, both regulators can play a role. This role can vary from consumer education to the imposition of fines on businesses that do not play by the rules. Consumers are able to file their complaints with ConsuWijzer so that ACM and AFM can determine which problems should be dealt with first.