Debt management firms need to clean up their act, says regulator
THE OFFICE of Fair Trading (OFT) has told 129 debt management firms that they face losing their consumer credit licences unless immediate action is taken to comply with its Debt Management Guidance.
The firms are required to provide independently audited evidence within three months that action has been taken to address identified concerns. If evidence is not provided, the OFT will instigate licensing action.
The formal warnings follow an OFT review of the debt management sector which found widespread problems.
More than half of the companies targeted in a mystery shopping exercise of the sector gave poor or incomplete advice, such as failing to disclose fees, or giving inadequate information about the range of alternatives to debt management plans. Some have even posed as charities in a bid to woo customers.
Ray Watson, director of the OFT’s consumer credit group, said: “People who are heavily indebted, desperate and vulnerable need advice which makes their problem better not worse and should not be exploited.
“Debt management firms must be clear about their charges and the options available to customers. The level of non-compliance we found across the industry is unacceptable. If any of the 129 firms identified do not improve their standards substantially they will be the subject of licensing action by the OFT.”
The regulator said that it plans to update its guidance to take explicit account of “new and emerging unfair business practices”, and is working with the two main trade bodies – the Debt Managers Standards Association (DEMSA) and the Debt Resolution Forum (DRF) – to support their initiatives to promote higher standards across the industry.
“We are also looking to the two main industry bodies to lead the way in raising standards and to meet their commitments to make the industry more professional and responsible,” said Mr Watson.
Since the OFT was given more powers under the Consumer Credit Act in April 2008, it has taken 37 firms to task by either refusing or revoking licences held to operate or shutting down websites.
