Debt companies could lose their licence for misleading advertising and poor advice
Debt companies look like an unscrupulous bunch don't they? Well, the Office of Fair Trading think so as they're threatening to close down more than 100 debt management firms, swiping their licences in the process.
Unless they take immediate action to comply with the OFT's guidelines, they go out of business.
This is all thanks to a review of the debt management sector which found that that problems were rife, in particular, with misleading adverts. One major complaint were that these companies failed to disclose that services weren't free when they claimed to be so.
In addition to this, the OFT discovered that advisers working for debt management companies were lacking in competence which prompted poor advice given and inadequate information.
Unlike free debt-advice charities like the Consumer Credit Counselling Service, Money Advice Trust or Citizens Advice Bureaux, these debt management firms can often cost more than consumers' existing debts.
Firms will find that their licence can be revoked if they give advice that is not in the best interests of the consumer, or indeed, show an unwillingness to change their habits in their wish to mislead customers.
The Guardian reports that the OFT said the quality of the information and initial advice provided to consumers is often "very poor, raising concerns about the competence and training of frontline staff".
Ray Watson, director of the OFT's Consumer Credit Group, said: "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.
"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."