The Treasury select committee has slammed banks for sending “misleading” debt collection letters to customers after obtaining further details of the practice from major lenders.
The TSC has today published an exchange of letters between chairman Andrew Tyrie and Royal Bank of Scotland, HSBC, Barclays and Santander.
Tyrie asked for further details on the practice of sending letters from in-house lawyers which appeared to come from independent firms of solicitors.
RBS and HSBC both acknowledge they previously sent communications of this nature to customers, while Barclays and Santander said they previously undertook their in-house debt collection activity under separate brands.
Tyrie says: “These sample letters seem to have been designed to pull the wool over consumers’ eyes. Many customers will have been understandably misled.
“What is more, from these responses it seems that this practice was widespread. Banks say that they have now stopped sending such correspondence but it should never have happened in the first place.”
In July, Tyrie criticised Lloyds Banking Group for issuing debt collection letters that were “calculated to mislead”.
RBS chief executive Ross McEwan says the bank established an in-house solicitor, Green & Co, and in-house debt collection agencies “to attract customers’ attention to the adverse consequences that could result from not meeting repayment obligations”.
He says Green & Co no longer takes on new work and all legal proceedings are now undertaken by external firms. The use of in-house debt collection agencies is also being phased out.
McEwan says RBS’ communications “should have been clearer to our customers”.
Green & Co issued 29,000 letters to RBS customers in 2013, while in-house debt collection agency Triton Credit Services issued 423,000 letters.
HSBC chief executive Alan Keir says the bank established an in-house law firm, DG Solicitors, to undertake debt recovery litigation practices in March 2001.
In early 2013, HSBC decided to organise all litigation under a single HSBC brand.
Keir says: “I recognise and welcome the focus on transparency and accept it would have been clearer for our customers had we not used a different legal brand name for work undertaken by solicitors employed by HSBC.”