Tel: 0161.443.4237  or  Mob: 07720.218846  
 
As many of you are aware the regulation of debt collection has moved to the FCA from the OFT. It was recently stated by a representative of the FCA that they considered that the activity of process serving fell under the regulated activity of debt collection and anyone partaking in the serving of process related to FCA regulated debt was doing so outside of the law.
 
It should be noted that this only applies to debt recovery matters where the debts are due under a credit agreement, a consumer hire agreement or a relevant Article 36H agreement.
 
It is the majority view of our ABI membership that process serving should not be regulated by the FCA and there are many arguments to support this.
 
The Governing Council are aware that this has caused considerable concern among our members and the industry.
 
Over the past few weeks, representation has been made to the FCA on behalf of our members. There initial response to the Association of British Investigators is as follows:-
 
‘The Government decided to transfer the consumer credit regulation to us from the Office of Fair Trading (OFT) on 1 April 2014. Process serving was an activity that may not have been looked at by the OFT before but our guidance is as follows.
 
Process servers are instructed to serve legal papers on borrowers who are to be subject to proceedings as part of the debt collection process. They are specifically instructed to act in this way as part of the debt recovery process and they know that they are playing a part in the debt recovery process.

The legal definition of regulated debt collection is very wide - 'taking steps to procure the payment of a debt due under a credit agreement............' Any activity carried on by a business in the UK, on behalf of a third party, that falls within that definition, will be carrying on debt collecting (in the absence of a relevant exemption or exclusion).
 
We take the view that the activities of process servers are likely to fall within the very wide definition of debt collection when they are taking steps to procure the payment of debts due under a credit agreement, a consumer hire agreement or a relevant Article 36H agreement.
 
Furthermore, even if process serving did not fall within the very wide definition of debt collecting, it seems very likely that it would, in the alternative, fall within the similarly wide definition of debt administration.’
 
I have been tasked by the Governing Council to lobby the FCA and work with other organisations whom share our views in an effort to change their view.

Many will be aware that the requirement for those purely offering tracing services (and not debt recovery) to be licensed with the OFT regime has now been removed and became exempt during the transition to the FCA. No mention is made of process serving anywhere within any OFT or FCA guidance.
 
It is the general consensus within the industry that process serving was not previously considered a debt recovery action nor a licensable activity in the previous OFT regime. However, the FCA do not share this view and despite insistence to the contrary, the FCA’s view is that it has always fallen within the wide definition of debt collection – “taking steps to procure payment” – or the wide definition of debt administration – “taking steps to enforce a credit agreement” and that because it is not exempt, it falls within regulation.
 
Many have raised the argument that if process servers are to be licensed then so should postmen. The FCA opinion of this is that there is a difference between process servers and your average postman or delivery driver. They suggest that a process server has clear engagement with the individual being served.  They explain the contents of the papers, and they advise the individual of next steps, whilst postman will simply knock at the door and ask for a signature (not even the addressee) and that there is a clear distinction between the two.  It has been pointed out that process servers do not ask for, nor do they take any payment. The FCA nevertheless say that process servers are aware of what the papers relate to (in these cases debt to a defaulted credit agreement).
 
I believe that we need to convince The FCA and the Treasury that:
 
·         The primary function of process serving is to meet an obligation of a legal process, irrelevant of the initial reason for the legal action (Injury claim, return of goods or debt recovery) and; the process server has no interest in the cause of action. They are not interested in “taking steps to procure payment”
 
·         Both a statutory demand and bankruptcy petition are an insolvency action and are not in legal terms a debt recovery action. The purpose of issuing a demand is to make someone bankrupt who is unable to pay their debts, and not to ‘procure the payment of a debt’.

Author ABI
 


Comments

Ruther
05/07/2014 4:36am

Whoever will handle the debt collection or whatever changes for, as long as debts should be settled and recovered. Businesses will basically play the role but considering the changes, some may have good impact in procuring payments but some will not.

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jonterns
05/26/2014 7:41pm

What was wrong with the old way of doing it? I don't understand why the job of process serving falls under another sector now, it seems pointless.

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shaun wright
05/26/2014 8:52pm

So is this only for process serving for debt collection purposes and no other? Why would that be any different and need to be regulated by a different agency?

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