The Office of Fair Trading is warning the debt collection and tracing sector that using neighbours to pass on messages to trace subjects is an unacceptable practice and should be ceased immediately.

It is calling on businesses in the sector to take positive steps to address the concerns. If businesses continue to use those tactics the OFT will look to take swift enforcement action.

The OFT has already imposed requirements on one ‘trace and collect’ company to confirm that it will no longer engage in this practice. Following an application by Link Financial Ltd to renew its existing consumer credit licence, the OFT – working alongside Lambeth Trading Standards – reviewed Link’s business practices and raised concerns about the use of the trace method.

Link agreed to stop using the practice and, as allowed under the Consumer Credit Act 1974, made specific proposals which addressed the OFT’s concerns. As a result the OFT has imposed requirements which state that Link must not in future use neighbours to pass on messages to trace subjects.

Nigel Cates, OFT deputy director for consumer credit, said: “Using neighbours to pass on messages to trace subjects is an unacceptable practice that contravenes our debt collection guidance. It has the potential, whether unintentional or not, to lead to the disclosure of private financial affairs and to cause distress and embarrassment, and we have made this clear in discussions with the Credit Services Association.

“We are pleased that Link has acted responsibly and taken positive steps to change its policies and procedures. If other businesses continue to engage in similar practices we will not hesitate to use our licensing and enforcement powers.”