Getting into debt isn’t a nice experience for anyone.
Letters, phone calls and emails repeatedly demanding payment can raise stress levels and drive people to despair.
But what about if you’re being pursued for a debt that isn’t yours – and may not even exist?
For thousands of people every year this becomes a very real cause for concern and can be surprisingly difficult to put a stop to.
Whether it’s because of a computer glitch, human error or shoddy practices, companies can be enormously obstinate when it comes to admitting they’ve made a mistake.
And when debt collection companies or solicitors get involved, that adds a whole new layer of complications.
With industry giants like British Gas, BT and Virgin you at least know there is a well-defined complaints procedure which employees have to follow.
But things start to a whole lot more murky when you get into areas such as the now infamous payday loans sector.
In July the government’s Office of Fair Trading (OFT) got new powers to take rule-breaking firms to task – and it has already put them to good use.
This month it handed a £544,505 fine to online payday lender MCO Capital Limited and revoked its consumer credit licence.
Trading under the names Help Loan and Balance Loan, the firm failed to properly check the identities of the people it was loaning money to.
This allowed fraudsters to use the personal details of 7,000 people to apply for millions in loans.
But then, even though it was aware they might not have borrowed money, MCO still pursued the victims for payment.
Detective Inspector Perry Stokes, from the City of London police, said at the time: ‘It is unacceptable that innocent people continue to be contacted by various credit collection companies asking them to pay back money they never borrowed.’
While it considers whether to appeal the judgement, the firm is currently still trading as Speed Credit, Paycheck Credit and Pop Credit.
But its aggressive tactics are not limited to the smaller companies in the sector.
The far better-known Wonga.com was also recently taken to task by the OFT for sending out letters alleging its customers had committed fraud by asking their card providers to reverse a payment made to the company.
A spokesman for the OFT said: ‘Consumers who are pursued by a lender for a debt they do not owe should write to the lender and, where appropriate, the debt collection agency, making it clear why payment is being refused.’
The most important thing to do in situations such as this is to remember not to panic.
You cannot be sued for breach of contract for money you do not owe and before taking often-threatened legal action companies are required to exhaust other options to settle the dispute.
If they don’t it won’t be looked on kindly by a judge, as legal proceedings are supposed to be an absolute last resort in such cases.
But burying your head in the sand isn’t the right choice either.
You may not end up in court but there can be other dangers of allowing companies to believe you owe money when you don’t – such as damage to your credit rating.
So if a company contacts you about a debt you are sure is false it is a good idea to follow these useful hints from Which? Magazine to try and make those responsible see sense.
· Make a request
Ask the company to carry out an investigation to show how much you owe and what the debt is for.
Request that all correspondence about the debt stops until this is completed.
If necessary, point out that a failure to disclose will be brought to any judge’s attention if the matter goes to court.
· Respond to all parties
Be aware that sometimes a company passes on debts to an independent debt agency.
If a debt agency is hired, address correspondence to the original company and copy in the debt agency, and ask it to check again with the company.
The Office of Fair Trading has issued guidance for debt collectors on how to deal fairly with debtors and you can download a complaint form from its website.
· Give a deadline
If your correspondence with a company is getting nowhere, tell it that if the matter isn’t resolved within 28 days you will consider it deadlocked and will then go straight to the company’s formal complaint procedure.
· Consider other options
If you continue to receive final demand letters, consider alternative dispute resolution.
Complaints can be addressed to the Financial Ombudsman Service, The Ombudsman Services or Cisas for phone operators and internet providers or the Energy Supply Ombudsman for energy companies.
· Follow it up
If the dispute isn’t resolved, your credit rating will probably be affected, so check your credit reference report for inaccuracies.
These reports are held by companies such as Callcredit, Equifax or Experian. If it’s incorrect, get the company that claimed it was owed money to amend the report, and also write to the reference agency yourself.