The chairman of the Treasury Select Committee, Andrew Tyrie, has condemned banks for sending letters from debt collection firms to frighten customers into making repayments.
The committee has published letters exchanged with banking bosses which addressed how the banks intimidated customers into thinking that they were being pursued by debt collectors.
Mr Tyrie wants banks to account for their actions, which, he said, were “designed to pull the wool over consumers’ eyes.”
“From these responses it seems that this practice was widespread,” he said.
RBS, Santander, HSBC and Barclays all confessed to having used similar ends in an attempt to make struggling customers pay up. The boss of HSBC, Alan Keir, said the practice dated back as far as the mid 1980s.
The banks said that the true identities of the legal agencies or debt collection services were clearly detailed in the small print. However, all of them claim to have ceased the practice.
RBS set up in-house solicitors to pursue debts, which operated under names including Green & Co, Triton Credit Services, Tamarisk, and Unidebt. HSBC adopted similar multiplicity, with names including Central Debt Recovery, DG Solicitors, Metropolitan Collection Services, and the Payment Services Bureau.
Antony Jenkins, the chief executive of Barclays, also admitted that the bank had used a number of debt collection ‘brands’ to reach customers who refused to open letters from the bank. He said it was designed to show customers that their situation had become more critical.
RBS chief Ross McEwan showed the most remorse, letters between the bank and the committee reveal. The New Zealander, who took over the reins last year, said he could not defend a practice that was to detrimental to customer interests.
“I totally accept that we must always make it clear to our customers who they are communicating with,” he wrote.
“The customer interest test should be applied to every single thing we do as a business. This activity failed that test.”
The consequences could be severe if the committee has its way. Wonga was recently ordered to pay over £2.5 million in compensation to 45,000 customers after similar practices were discovered as part of its debt collection methods.
And with big banks now caught out as practitioners of this dubious debt collecting method, committee member John Mann has demanded an urgent inquiry into what he claims is a scheme clearly designed for intimidation.
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