Press releases 2010 -

OFT requires MBNA to improve debt collection practices

136/10 14 December 2010

The OFT has imposed requirements on credit card lender MBNA to secure
improvements to the way its in-house debt collection arm deals with customers in
financial difficulties.

An investigation was launched by the OFT after Citizens Advice raised concerns about MBNA's practices
when dealing with consumers in financial difficulties or their appointed representatives.

The OFT found that the company was not being sufficiently clear when communicating with customers in
financial difficulty who were offering token payments, and was in some cases failing to follow its own
policy or procedures by bypassing customers' appointed representatives.

MBNA has cooperated fully during the investigation and is in the process of addressing the issues. As a
result of the requirements, which take effect on 1 January 2011, MBNA must:

make it clearer in letters sent to customers in financial difficulty that it will accept the repayment
amount they have demonstrated they can afford to pay, and

maintain its policy of only contacting customers who have appointed a representative to act on
their behalf if the customer or the representative has given permission or confirmed that the
representative no longer acts for the customer; or the expected payment has not been made and
MBNA has made reasonable efforts to contact the representative without success.

The requirements do not preclude MBNA from sending statements of account or other communications
in accordance with statutory obligations.

Ray Watson, Director of the OFT's Consumer Credit Group, said:

'Our investigation found problems with the way MBNA communicates with customers in financial
difficulties. MBNA has agreed that it will make its debt collection letters clearer and clarify its policies and
procedures for dealing with appointed representatives.'

NOTES

1. The full name of MBNA is MBNA Europe Bank Limited. Download the requirements imposed
on MBNA (pdf 61kb).

2. Under the Consumer Credit Act 1974 (CCA), businesses that offer goods or services on credit
or lend money or are involved in activities relating to credit or hire must be licensed by the OFT.
The OFT has a duty to protect the interests of consumers by monitoring the fitness of those
holding or applying for licences.

3. Under the CCA, where it is dissatisfied with any matter in connection with a business, a
proposal to carry on a business or any other conduct by a licensee, associate or former
associate, the OFT may impose 'requirements' on the licensee. Requirements may require a
business to do or not to do (or to cease doing) anything specified for the purposes connected
with addressing the OFT's dissatisfaction, or securing that matters of the same or a similar kind
do not arise.

4. There are two ways that the OFT can impose requirements. Firstly, the OFT may issue a formal
notice to the business informing it of the requirements it is minded to impose. The business
may then make representations to an adjudicator who will consider these and make a
determination. The business has a right of appeal to an Independent Tribunal. Alternatively, the
business may propose requirements and if these are in the same terms as the requirements
the OFT is minded to impose, the OFT can impose these requirements without proceeding with
 the formal notice. Under this procedure, which has been used in this case, the business does
not have a right of appeal to the Tribunal.

5. A breach of a requirement can lead to a maximum fine of Ä50,000 per breach and/or be
grounds for revocation of a consumer credit licence.

6. All licence holders and applicants, including lenders collecting their own debts, are expected to
adhere to the minimum standards set out in the OFT's Debt Collection Guidance.

7. As a result of OFT's discussions with MBNA, the company has also agreed to publicise more
widely its criteria for accepting Individual Voluntary Arrangement proposals made on behalf of
debtors by Insolvency Practitioners, by writing to the Insolvency Service and the two main
industry bodies, the Debt Managers Standards Association and the Debt Resolution Forum.
The OFT encourages other lenders to take a similarly open and transparent approach.

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