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The Office of Fair Trading (OFT) issues formal warnings today, following their review of the debt management sector which found widespread problems.
The 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. Debt management companies are fee-charging firms that provide advice and solutions to consumers with debt problems, which sit alongside free Government funded and charitable services.
The OFT launched the review in November 2009. The methodology included an internet advertising compliance sweep of 100 debt advice and debt management websites, questionnaires, meetings with trade associations, consumer representative bodies and Government departments, on-site compliance visits, a mystery shopping study and a complaint form for consumers on the OFT's website.
Key findings from the review show:
Today's OFT report sets out a detailed action plan to improve standards across the industry, and plans to update its guidance to take explicit account of new and emerging unfair business practices. The OFT will work with the two main trade bodies, the Debt Managers Standards Association (DEMSA) and the Debt Resolution Forum (DRF) to support their initiatives to introduce higher standards into the industry.
For further information read the full OFT report, ‘Debt management guidance compliance review’.
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The 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. Debt management companies are fee-charging firms that provide advice and solutions to consumers with debt problems, which sit alongside free Government funded and charitable services.
The OFT launched the review in November 2009. The methodology included an internet advertising compliance sweep of 100 debt advice and debt management websites, questionnaires, meetings with trade associations, consumer representative bodies and Government departments, on-site compliance visits, a mystery shopping study and a complaint form for consumers on the OFT's website.
Key findings from the review show:
- Misleading advertising is the most significant area of non-compliance, in particular failing to disclose a fee is retained by the business and misrepresenting debt management services as being free when they are not;
- Frontline advisers working for debt management companies are lacking in competence and are providing poor advice based on inadequate information; and
- There is low industry awareness of the Financial Ombudsman Service (FOS) rules for resolving consumer complaints.
Today's OFT report sets out a detailed action plan to improve standards across the industry, and plans to update its guidance to take explicit account of new and emerging unfair business practices. The OFT will work with the two main trade bodies, the Debt Managers Standards Association (DEMSA) and the Debt Resolution Forum (DRF) to support their initiatives to introduce higher standards into the industry.
For further information read the full OFT report, ‘Debt management guidance compliance review’.
More...
