Whilst many debt management companies strive for high standards of transparency and fairness, recent findings from the OFT and Ministry of Justice have found that there are still some out there who are less than adequate.
The OFT has launched a round of compulsory audits on the debt management industry today. One type of debt management company which has caused significant problems are so called ‘Claims Management Companies’, they charge huge fees for a promise of wiping out debt using legislation. Their advertising is heavily regulated, in that they cannot offer guaranteed results or make unrealistic claims, however, until recently, the OFT had not taken significant action.
Over the past few months the Ministry of Justice has closed 100 of these rogues and announced that another 500 are under scrutiny. Now the OFT has decided that it needs to get involved and will publish their findings in 2010.
The OFT has taken 24 formal actions since April 2008, warnings include cold-calling, websites that imitate government sites and mail shots. The review aims to look closely at the practices of debt management firms as the market has evolved significantly since the last review in 2003. Whist some companies, like Chiltern, have been around since the mid 1990′s there have been a large number of new firms starting up in the last 3 years whose experience is not always adequate.
There has also been a massive growth in online advertising; many companies have ploughed large amounts of money into websites and advertising that is very difficult to police. The credit crunch has only fuelled the fire of rogues entering the market and making spurious claims. As part of the review, there will be on online forum where people can discuss and complain about issues and specific companies.
The review will include a sweep of online debt management advertising, an online forum for consumers wishing to complain about a licensee and a questionnaire to licensees involved in debt management.
Ray Watson, OFT director of consumer credit, said: “A recent increase in formal OFT enforcement action, rising complaints and new problems emerging in the market suggest that some businesses are still not meeting minimum standards. This review will help us identify those practices that are harming consumers, as well as the reasons for non-compliance, and will help us target our enforcement action.”
Ivan Cooper, Chairman at Chiltern Debt Management said: “We are very supportive of this review, we believe that it can only be good for the industry. We believe that compulsory regulation through bodies like DEMSA is the way forward, and hope that the government will seriously consider it for the future.”
