DEBT collection agencies need to be placed on “a proper legal footing”, according to a Master of the Royal Court – who warned that the current system leaves a “serious responsibility” unregulated.
In a recently published judgment, Advocate David Cadin added his voice to previous calls for the regulation of debt collection agencies.
He echoed comments which said that while these firms provide an “important service” helping individuals and businesses recover money owed, their work “may not necessarily have a sound legal foundation” and should be placed on “a proper legal footing”.
The judgment arose from a case brought by local debt recovery company SkyFall Collections, which was acting as assignee for a Guernsey resident whose holiday was disrupted after being denied boarding by Swissport staff at Jersey Airport.
The court struck out the case, finding that SkyFall had no legal right to bring the claim because it was trying to pursue someone else’s case with “no legitimate interest”. As a result, the claim was deemed invalid and, unless the Guernsey resident continued the case within 28 days, it would be struck out as an abuse of process.
Although he dismissed this specific case, Advocate Cadin acknowledged that debt collection agencies such as Skyfall had helped the Petty Debts Court manage its caseload in many other instances.
“Indeed, it is not hard to appreciate that significantly greater resources would have been required in the Petty Debts Court this year if it were to have had to deal with an additional 1,200 litigants in person, instead of dealing with SkyFall alone, acting as assigned on their behalf,” he said.
But Advocate Cadin warned that, without a proper legal footing, the activities of such agencies could expose both consumers and businesses to risk.
He pointed to earlier calls from Master of the Royal Court Matthew Thompson in Hill v Meyer in 2016 and Commissioner Alan Binnington in Mucky Mutz Ltd v Hightide Investments Ltd last year – both of whom urged the introduction of a formal regulatory regime similar to that of the Financial Conduct Authority in England and Wales.
Currently, only qualified lawyers have rights of audience before the Petty Debts Court and although debt collection firms are widely used, they fall outside that framework and are not subject to any professional standards or oversight.
Mr Binnington explained that, while “no criticism” was intended of existing agencies, “the ability to represent others to collect debts before the courts is a serious responsibility which would justify regulation”.
He added: “If individuals or businesses are to be permitted to represent others before the courts of Jersey in relation to debts, it may be appropriate to give consideration to requiring some equivalent system of regulation for such businesses.”
