HIGH-STREET banks are selling customers’ debts to “vicious” agencies who begin bankruptcy proceedings against homeowners for debts as small as £1,800.

The agencies are behind a surge in statutory demands - letters giving debtors 21 days to clear debts of £750 or more or face bankruptcy and repossession of their home.

Banks and credit card companies have sold debts worth £15 billion to debt-purchase firms as they seek to get bad debts off their books and cut their in-house collection costs.

Experts say the low-profile firms who buy the debt behave more aggressively than the original lenders.

Baines & Ernst, which helps people organise their finances, said the number of statutory demands issued by these firms had doubled in the past year.

Nick Pearson, director of external affairs, said: “When banks used to hold on to the debt, they didn’t want to damage their reputation by issuing statutory demands. Debt purchasing firms don’t have those fears and are much more vicious with people.”

When a bank sells the debt to an agency, it typically writes off up to two thirds of the value of the outstanding loan.

Citizens Advice, National Debtline and the Consumer Credit Counselling Service have unearthed harassment tactics used by some debt collection firms. These include: Calling debtors up to nine times a day and sending repeated text messages.

Refusing to respect debtors’ privacy, by talking to their parents, partner and teenage children about their debts. Contacting debtors at work, even when they have been urged not to. Refusing to talk to third parties appointed to represent the debtors’ interests.

Deborah Shields from National Debtline said: “We currently have a case of a woman who has had an order for sale placed on her home after she was pursued for a debt of £1,800.”

Lenders often simply use statutory demands as a scare tactic: most are not followed through to bankruptcy.

One debt collection agency, 1st Credit, has taken over a package of 3.2m debts from the banks, worth £4 billion. Pearson said: “1st Credit is behind 50% of the statutory demands that we see. We are seeing perhaps 40 cases a month where a debtor is signed up with a plan to make monthly instalments. Then 1st Credit has bought the debt from the bank and wades in saying that the debt has to be paid in full immediately.”

Susan Towey, 40, and husband Andrew, 42, from Mexbor-ough in South Yorkshire, were called by 1st Credit on Christmas Eve and told they had seven days to pay almost £12,000 or they would be made bankrupt. The Toweys had fallen behind with payments on their £15,000 Halifax loan after Andrew’s plumbing business faltered.

“I was begging with the woman on the phone, but she said they would only wait three months before they issued a statutory demand,” said Susan. “It was just so frightening. I honestly considered killing myself that night. It’s been the worst Christmas of my life.” David Rowen, 37, a taxi driver, and his wife Debbie, 34, who live in Spondon, Derbyshire, received a statutory demand for a £2,400 debt with Lloyds TSB on Christmas Eve from Connaught Collections, which is part of the same group as 1st Credit.

“I’m not trying to get out of paying this debt if we do owe it, but they won’t even tell us where it comes from,” said David Rowen. “They have been abusive and aggressive and they just don’t listen.”

A spokesman for 1st Credit said: “If we are unable to reach agreement on how the debt will be settled and only after all attempts have been exhausted, do we consider using legal means to resolve the situation.”

Staff who work for 1st Credit are told to honour the code of the Credit Services Association, which represents the debt-purchase industry. It urges staff to “conduct dealings with debtors in a fair and reasonable manner”.

Gareth Thomas, the consumer minister, said he was considering strengthening regulation to ensure creditors took legal action only as a last resort.

A NATION IN DEBT

£1.2 trillion - total amount of debt owed by Britons

£15 billion - value of debts bought from high street lenders by debt purchase companies

150,000 - bankruptcies expected this year. A rise from 28,000 in 2003

75,000 - repossessions expected this year

500,000 - homeowners expected to fall at least three months behind in their mortgage payments

National Debtline: 0808 808 4000