It’s time for fair debt collection by mobile phone companies

Mobile phones are an essential service — it’s time to bring mobile debt collection in line with other essential services.

Debt. It’s a topic that’s been thrust into the spotlight recently, with reports that UK consumer debt has grown 19% over the last 5 years — at its highest growth rate since 2005. With people increasingly relying on credit to purchase essential items, stronger rules recently proposed by the telecoms regulator Ofcom around how mobile phone companies collect debt are welcome. It’s now time for mobile companies to take action.

Owning a mobile phone is no longer a luxury or a nice to have — it’s an essential service. They are central to running our daily lives. 2 in 5 people use mobiles as their primary means of accessing the internet. They’re even more essential for people in low-income households — who are 4 times more likely to use a mobile as their only form of telecommunications than those in the highest-earning households.

In our experience, mobile companies lag well behind providers of other essential services when it comes to collecting and managing customer debts. Citizens Advice helped 41,964 people with mobile debt related problems last year. We have first-hand insights into how mobile phone companies manage debt collection. Some of the issues we see include:

• debt collectors called in early — sometimes when the customer is still disputing the debt
• poor notification of actions being taken by the company, particularly around credit history black marks
• difficulty talking to someone at the company about the debt who has the authority to negotiate flexible repayments based on a customer’s ability to pay.

We also know mobile debts disproportionately affect people under the age of 25. Young people are twice as likely to contact us with a mobile debt problem than they are with one related to energy or water. According to Money Advice Trust, 8% of people aged 18 to 24 with a mobile phone contract have missed a payment in the past year. 1 in 12 regularly struggle to pay their bill or top up their credit.

Unfair debt collection practices make it more difficult for people to manage their debts

Unfair debt collection practices are a problem. They make it difficult to manage and prioritise debts. They push people on low-incomes to cut back on essentials or take on further debt through credit cards or overdrafts. They can have a long-lasting negative impact on credit ratings, and are known to contribute to stress and anxiety.

This is a problem that can be fixed. We’ve seen water and energy companies dramatically improve their practices over the last decade, showing what can be done with leadership from regulators and consumer advocates — and a willingness from providers to change processes and cultures.

Citizens Advice has played a key role in improving debt collection practices in regulated sectors. Since we launched our report ‘Falling Behind’ looking at the mobile sector in 2016, we’ve seen some good progress, including the introduction of mandatory opt-in monthly mobile bill caps into the Digital Economy Act — an amendment we pushed for in Parliament.

Last month Ofcom confirmed that it will extend the rules on debt collection from providers of fixed-line phones to the mobile market for the first time. From October 2018, mobile companies will be required to make sure that their debt collection policies are ‘proportionate and not unduly discriminatory’ and, specifically, to ensure that they contact consumers before disconnecting them. They will also have to publish their policies, a move which will make it easier for individual consumers to navigate the process.

3 steps towards changing how people in debt are treated

However, more needs to be done to ensure that the introduction of these high-level principles really leads to a change in how people in debt are treated.

So, what do we want to see? Three things:

1. Mobile companies taking action to ensure their debt collection practices are fair by aligning them with our mobile debt collection charter, including:

• directing people to sources of free debt advice
• proactively contacting customers who look like they’re at risk of falling into problem debt
• making it easy for customers to contact companies and discuss flexible arrangements that take into account their ability to pay
• suspending all debt collection activity where a customer reasonably disputes a bill.

2. Mobile companies adopting Ofcom’s requirement to publish their debt collection policies online, in a form that is simple to access and easy to understand. This is a straightforward step and could be done immediately.

3. Ofcom to go further by showing clear leadership and publishing detailed guidance on what good debt collection practices look like — as the regulators in energy and water do.

You can find out more about the work Citizens Advice has done on mobile debt collection at our Dialling Down Debt campaign page.