The Office of Fair Trading (OFT)
has estimated commercial fee charging debt management companies (DMC’s) make
£250 Million a year from over-indebted clients.
Since the last review issues have
continued to be raised over advertising and marketing practices as well as the
quality of advice given by these firms.
Following the OFT’s earlier
review, 129 warnings were issued to DMC’s while a further 67 warning letters
were sent out. The OFT has since claimed 87 firms have left the market either
voluntarily or due to enforcement action.
However, there remains concern
over the quality of the management advice in this sector where there are “vulnerable
consumers”.
The new guidance looks to clamp
down on firms making “false or misleading claims” about the business such as
operating websites which appeared to be run by a Government of a charitable
body.
Any “unfair or improper
practices” could lead to the loss of a firm’s consumer credit licence. Among
the practices identified were the sending of unsolicited text messages, email
or voicemails and the issue of inappropriate financial incentives to staff
giving debt advice.
The latest guidance has been
welcomed by the two leading trade associations for the industry: The Debt
Manager Standards Associate (DEMSA) and the Debt Resolution Forum (DRF). The
pair together represent some 46 DMC’s and aim to promote professional standards
in the industry.
Tim Corfield
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