A demand for money is not always right. The borrower may not be the person who took the loan, the debt may not exist or the figure may be wrong, and a repayment offer may be turned down. The FCA’s Consumer Credit sourcebook sets rules for these situations in CONC 7.14 and CONC 7.4, and they apply across the UK to firms lending to consumers and to those collecting consumer credit debts.
When a debt is disputed on valid grounds
CONC 7.14.1R says a firm must suspend any steps it takes, or its agent takes, in the recovery of a debt where the customer disputes the debt on valid grounds or what may be valid grounds. The guidance in CONC 7.14.2G gives three examples of valid grounds: the person pursued is not the true borrower or hirer under the agreement, the debt does not exist, or the amount being pursued is incorrect. CONC 7.14.3R also requires the firm to investigate the dispute and to provide details of the debt to the customer in a timely manner. CONC 7.14.5R adds that the firm must give the customer information on the outcome of its investigation.
Who has to prove the debt
CONC 7.14.4R deals with the burden of proof for two kinds of dispute. Where there is a dispute as to the identity of the borrower or hirer, or as to the amount of the debt, it is for the firm, and not the customer, to establish that the customer is the correct person or that the amount is the correct amount owed under the agreement. A customer who thinks a loan was taken out in their name can therefore ask the firm to show the agreement and the sums claimed, and can also check the credit file, as explained in the guide to errors on your credit file.
Disputes about debts held by a collector
A disputed debt may be held by a firm other than the original lender, and CONC 7.14.6R covers that case. Where a customer disputes a debt and the firm seeking to recover it is not the lender or the owner, the firm must either pass the information the customer provided to the lender or owner, or, if it has authority to investigate a dispute, notify the lender or owner of the outcome of its investigation. How a debt changes hands is explained in the guide to assignment of debt.
What counts as deadlocked debt
CONC 7.14.7G says a debt repayment is deadlocked where the customer or the customer’s representative has acknowledged liability for the debt and proposed a repayment plan, but the firm seeking to recover the debt does not find the proposed plan acceptable. Acknowledging a debt and offering to pay it is a different step from disputing it.
How a firm must treat a repayment offer
CONC 7.14.8R requires a firm to give due consideration to a reasonable offer of repayment made by the customer or the customer’s representative. If a firm rejects a proposal from a customer in default or in arrears difficulties, CONC 7.14.9R says its response must include a clear explanation of the reason for the rejection.
CONC 7.14.10R goes further. If a firm rejects an offer because it is unacceptable, it must not engage in any conduct intended to, or likely to, have the effect of intimidating the customer into increasing the offer. The guidance in CONC 7.14.11G says that, depending on the circumstances, examples that may contravene the rule include immediately sending field agents to visit the customer, or communicating that it will do so, and substantially increasing the rate of interest or imposing a substantial charge, or communicating that it will do so. CONC 7.14.13G says that merely making a counter-offer, or merely taking steps to enforce an agreement, would not contravene the rule.
Settling for less than the full amount
CONC 7.14.14R says that if a firm accepts a customer’s offer to settle a debt, it must communicate formally and unequivocally that the offer, accompanied by the relevant payment, has been accepted as settlement of the customer’s liability. CONC 7.4.2R adds a further duty. Where a customer offers a settlement payment lower than the total owing, or a lender decides to stop pursuing the customer, and the debt or part of it continues to exist despite that, the lender or owner must explain in clear terms that the debt continues to exist and that the customer could be pursued by another firm that buys it.
Practical steps
A customer disputing a debt can write to the firm setting out the ground, such as the debt not existing or the amount being wrong, and keep a copy. The guide to complaining to the Financial Ombudsman Service describes the complaint route. Free help preparing an offer is covered in the guide to free debt advice.
FAQs
Must a collector stop chasing me if I dispute the debt?
CONC 7.14.1R says a firm must suspend steps to recover a debt where the customer disputes it on valid grounds or what may be valid grounds.
Who has to prove a debt is mine?
Under CONC 7.14.4R, where identity or the amount is disputed, it is for the firm, not the customer, to establish that the customer is the correct person or that the amount is correct.
Can a firm refuse my repayment offer?
Yes, but under CONC 7.14.8R it must give due consideration to a reasonable offer, and under CONC 7.14.9R it must explain the reason for rejection clearly.
The bottom line
FCA rules in CONC 7.14 require firms to suspend recovery, investigate and report back when a debt is disputed on valid grounds, to prove identity and amount, to consider reasonable repayment offers and explain a rejection, and not to intimidate customers into increasing an offer. An accepted settlement must be confirmed formally, and any remaining debt must be explained. This is general information, not legal advice.