In Roberts v Bank of Scotland the Court of Appeal reminded lenders that debtors are not obliged to speak to them. This article by Jeremy Bouchier appeared in the December 2013 addition of "credit, collections and risk".
Harassment is an emotive word conjuring up images of bullying and stalking. It is not something one would expect to feature in a lender/ customer relationship.
By introducing the Protection of Harassment Act 1997 ( the “PHA”), Parliament made it clear that unacceptable behaviour exposed the wrongdoer to not just a civil claim for compensation but the risk of criminal prosecution. A variety of disputes (eg boundary and employment) can give rise to a claim under the Act. Liability can be triggered even if there is no actual contact by (or attempted contact) by the wrongdoer. In 2004 Leveson J (as he then was) held that failure to prevent a dog barking through the night was harassment of the dog owner’s neighbours.
The versatility of the legislation has meant that lenders and indeed all institutions are vulnerable to a claim for harassment under the PHA or the catch all “Unfair Relationship" provisions of the CCA. The typical allegation is that the customer has been subject to a bombardment of telephone calls/texts/ letters by the creditor (or by agents representing the creditor) chasing overdue payments.
For a while creditors could rely on clear rulings by the (then) House of Lords and the Court of Appeal to the effect that harassment only arose when there were two separate instances of conduct which individually amounted to criminal activity. With such a narrow definition of harassment, creditors assumed that repeated efforts to speak to a customer who had missed payments would not constitute harassment.
Increased regulatory scrutiny on creditors’ behaviours heralded by the TCF principles and much publicised recent court rulings on harassment have changed the landscape.
Warning signs were provided by the case of Ferguson v British Gas. After changing gas supplier Mrs Ferguson received computer generated letters wrongly demanding money which she did not owe. The court allowed her to claim for harassment.
In Harrison v Link the repeated use of non–traceable telephone calls received the following criticism from the Judge - “such conduct has no proper function in the recovery of consumer debt”.
This summer Mrs Roberts (representing herself) succeeded in the Court of Appeal with her claim for harassment against the Bank of Scotland and received damages of £7,500. At a time when her borrowings only marginally exceeded the agreed limit the Bank contacted or attempted to contact Mrs Roberts 547 times between the end of December 2007 and January 2009 despite her repeated requests that telephone contact should cease.
The Court of Appeal acknowledged the Bank was right to initially try to speak to Mrs Roberts and confirmed “it obviously made sense for the bank to contact the claimant and to seek a mutually acceptable resolution of the problem”.
But what the Bank could not do was continue with those attempts when she had told them to stop. The court gave creditor’s this warning – “the debtor is fully entitled to say that he does not wish to talk to the creditor. In those circumstances the creditor is thrown back upon his full legal remedies. That is what the courts are there to provide. They are there to ensure that creditors do not resort to the remedy of self-help”.
Account rehabilitation forms the cornerstone of many recovery strategies because of the prominence given to it by the Regulators .Successful account rehabilitation depends on meaningful contact with a co–operative customer. The problem is that most attempts to contact a customer are based on automatic dialler telephone systems, computer generated correspondence and pre–determined work flows.
Whilst the frequency and content of the calls made to Mrs Roberts were unusual, the processes used by the Bank were not. Unless these processes are flexible and intelligent enough to take on board what the customer has said the creditor is vulnerable.
If a customer does not want to co–operate with a creditor then that is his choice. The Court of Appeal has confirmed that choice needs to be respected but also emphasised the creditor is quite entitled to resort to legal proceedings.
This is a welcome reminder from the senior judiciary that litigation is perfectly justified and,in certain circumstances ,is the only permitted step – other than permanently writing the debt off.