Firms should not seek to enforce debts where they are aware that the customer is subject to a bankruptcy order (or in Scotland where sequestration is awarded in relation to the customer), a debt relief order or an individual voluntary arrangement (or in Scotland a protected trust deed or a Debt Arrangement Scheme).
Firms seeking to recover debts under regulated credit agreements should have regard to the requirements of the relevant pre-action protocol (PAP) issued by the Civil Justice Council. This seeks to ensure that firms and customers are acting fairly and reasonably with each other in resolving any matter concerning arrears and to encourage more pre-action contact in an effort to seek agreement between the parties on alternatives to repossession.
A firm must provide a customer or person acting on the customer's behalf with information on the amount of any arrears and the balance owing.
Where a customer offers to pay less than the total amount owing, or the lender decides to stop pursuing a customer in respect of a debt arising under the credit agreement, but the debt continues to exist, the lender must make sure that the following is clearly explained to the customer:
- the fact that the debt continues to exist; and
- the customer could be pursued for payment if another firm purchases the debt.
Firms may not levy charges on customers for debt recovery or arrears unless they have a contractual right to recover such costs. Where there is such a contractual right, the charges and the conditions for making them must be set out in the credit agreement. The actual charges impose must be no higher than is necessary to cover the firm's reasonable costs.
Firms must not unfairly disclose or threaten to disclose information relating to the customer's debt to a third party. When contacting a customer about a debt a firm must make sure that it does not act in a way which could be publicly embarrassing to the customer and should take reasonable steps to make sure that third parties do not become aware that the customer is being pursued in respect of a debt.