Loan Debt Management Companies Close Down
In recent years and particularly since the effects of the credit crunch have hit the UK, there has been a growing problem with people falling behind in their personal loan and credit card payments, leading to a build up of loan arrears and bad credit loans.
This in turn has led to a dramatic increase in the number of Debt Management companies to offer help and advice to those borrowers unable to manage their loans and other debts.
Whilst the majority of these firms are legitimately trying to help people with their loan debts, there are some who have been taking advantage of vulnerable borrowers, by charging high fees and not repaying any of the original loan or credit card debt, thereby often leaving the client in a worse position than when they were dealing with their loans themselves.
As a result of an investigation into debt management firms, the Office of Fair Trading (OFT) has issued new guidelines for companies operating in the debt management sector, which are designed to improve compliance in the industry, remove misleading advertising and generally improve the quality of service provided to people who are often desperate to sort out their loan problems.
The OFT published its original compliance review back in 20120 and followed this up with warnings to 129 separate debt management companies. Since then, 43 companies have voluntarily surrendered their consumer credit licenses and a further 11 companies have had their licences revoked by the OFT.
David Fisher of the OFT said “The guidance is designed to leave firms in no doubt about the standards the OFT expects and what they must do to comply with the law. The failings identified by our recent review are unacceptable and show that debt management businesses must raise their standards or face enforcement action.”
