A debt recovery firm has agreed to provide redress to more than half a million consumers after being reprimanded for shoddy due diligence and debt collection practices by the financial regulator.
Motormile Finance UK Limited (MMF) will pay redress totalling £154,000 and write off claims to outstanding debts of £414 million.
The Financial Conduct Authority (FCA) found Motormile had failed to check the details of debts it had bought from other lenders, resulting in “unfair and unsuitable” customer contact for recovery of the estimated debts.
Most affected consumers will see Motormile write off existing debts, as the company is unable to evidence that outstanding balances are correct and properly due. Around 2,000 people will receive redress of £70 on average.
The company has also agreed to amend its collection practices to prevent future failings.
Jonathan Davidson, retail director at the FCA says: “We have agreed this package, and previous action, to protect the customers of Motormile from unfair practices. We have worked closely with Motormile, and are now satisfied with its progress and the way that it will address its previous mistakes. This evidences the importance of conducting sufficient due diligence and how failing to do so leads to poor treatment of customers.”
A spokesperson for debt advice charity StepChange says: “This is obviously good news for the hundreds of thousands of people who have been affected.”
Motormile refused to answer our questions, but provided a written statement from chief executive Denise Crossley, saying: “Working so closely with the FCA has provided MMF with a very clear understanding of what is expected under the new regulatory regime and I can assure our customers that we have embraced this.
“We apologise to all of the affected customers and will be addressing the issues through the redress scheme we have agreed with the FCA.”
How do I know if I’ve been affected?
Motormile refused to tell us which companies it bought debts from, or when these historic failures happened.
But the FCA has advised customers that they do not need to take any action, and that affected customers will be contacted by February 2017.
More information is available at on Motormile’s website.
What are my options if I’m being chased by a debt recovery agency?
“The sale of debts is a common part of the debt collection process, if people find that their debt has been sold, the important thing is not to worry and not to ignore it,” says a StepChange spokesperson. “It’s very common for lenders to sell debts which are in arrears.
“There is lots of good advice online, but there are a few important things to look at. Has the debt been bought by a collection agency or is the debt collector simply collecting on behalf of the original firm? If the debt has been bought, the debt collection agency becomes the new owner of the debt.
“Debt collection agencies don’t have special legal powers, they can’t do anything that the original creditor couldn’t do. They will likely use letters and calls to contact you, don’t ignore them, they can take court action so it’s best to engage.
“Debt collection agents can come to your house, but this is not common and the usually prefer to contact you phone. If they do visit, remember they are not bailiffs and don’t have special powers – you don’t have to open the door or let them in; they must show proof of ID; they must leave if you ask them to; and they can’t take anything from your house.
“If you are worried about your debts, make sure you contact one of the free debt advice organisations, such as StepChange Debt Charity”.
Many charities, such as StepChange, National Debtline, and Christians Against Poverty, as well as government services including the Money Advice Service all offer free guidance to people struggling with debts.