Britain’s high street banks are masquerading as law and debt recovery firms in letters to their customers, it has emerged.
Barclays, Lloyds, Halifax, RBS and HSBC are among the lenders that engaged in the practice – which was the subject of a fierce row only last week when it was found that payday loan company Wonga was sending debt collection letters from fictitious law firms.
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Citizens Advice CEO Gillian Guy said: "It is dishonest of lenders to disguise letters chasing people for money as being from third parties.
"People who are heavily in debt are under immense financial strain and need to know where to go for help, not be harassed by bogus companies exerting undue pressure and in some cases charging them for it."
The intention of the letters is thought to have been to put pressure on customers to pay back loans by making them think the requests for debt repayments had been passed on to third parties.
In many cases the letters were actually from the banks’ internal legal departments;
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By GlobalData- Barclays has been using the name Mercers Debt Collection for Barclaycard debts;
- Lloyds Bank has been using the name Sechiari, Clarke and Mitchell (SCM) Solicitors since at least 2011;
- Royal Bank of Scotland and its NatWest arm have been using Green & Co Solicitors;
- Until January this year, HSBC used DG Solicitors in Edgbaston, Birmingham.
Barclays said it had stopped using the other name and the change had been implemented this week.
Lloyds said it had decided to phase the name out but also defended the practice, saying: "Letters to our customers identify the qualified solicitor of record and make clear that SCM Solicitors forms part of Lloyds Banking Group’s in-house litigation department."
RBS said: "Our customers should never be in any doubt about who they are communicating with.
"We have reviewed our policies in this area, and will stop the use of any solicitor or debt-collection brand names in correspondence with our customers that could cause confusion."
The practice is legal because although the fictitious law firms are not registered with the Solicitors Regulation Authority, the individual solicitors working for the bank’s legal department are.
Payday lender Wonga has come under heavy criticism for sending letters from non-existent law firms Chainey, D’Amato & Shannon, and Barker and Lowe Legal Recoveries, leading customers to believe that their outstanding debt had been passed to a law firm, or other third party.
The lender was forced to pay out £2.6m ($4.4m) to customers in compensation after the Financial Conduct Authority ruled that between October 2008 and November 2010 Wonga used unfair debt collection practices.
Clive Adamson, director of supervision at the FCA, said: "Wonga’s misconduct was very serious because it had the effect of exacerbating an already difficult situation for customers in arrears. We are pleased that Wonga has been working with us to put matters right for its customers and to ensure that these historical practices are truly a thing of the past.
"The FCA expects firms to pay particular attention to fair treatment of those who have difficulty in meeting their loan repayments."
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FCA launches investigation into largest UK payday lenders
