OFT updates guidelines for debt management firms

| March 22, 2012 | 0 Comments
OFT updates guidelines for debt management firms

The Office of Fair Trading (OFT) has today published new guidelines for firms offering debt management advice or credit repair services to consumers.

Complaints about debt management firms have increased significantly in recent years; 546 complaints were made to the Financial Ombudsman Service last year compared with 463 in 2010.

The complaints included concern over the high fees charged by firms which their customers could have spent on paying off their debts.

The guidance published today give examples of the type of practices that could lead to debt management firms having their licences withdrawn, including sending unsolicited marketing information via text messages, email or voicemails.

Enforcement action could also be taken against a firm making misleading claims about the business.

Some debt management firms operate websites that look like charity or government sites rather than commercial sites, a practice that will now have to stop.

The OFT is also clamping down on firms offering incentives to staff giving debt advice, as this could lead to them giving inappropriate advice to customers for their own financial gain.

Debt management firms are also now required to refer consumers to not-for-profit advice organisations in certain circumstances and to have appropriate policies in place for dealing with vulnerable clients.

David Fisher, director of the OFT’s Consumer Credit Group, said: “All too often it may be particularly vulnerable consumers who fall victim to poor quality debt advice and we will continue to take action against businesses that fail to follow our guidance.”

Earlier this month a Debt Management report by MPs called for tougher action against commercial debt management companies and payday loan companies.

It said that commercial debt management companies should provide clearer information for consumers.

Committee chairman Adrian Bailey said: “During these difficult economic times, increasing numbers of people up and down the country - not least some of the most vulnerable members of our society - are relying on the provision of consumer debt management services and payday loans to make ends meet.

“And yet this industry remains opaque and poorly regulated.”

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