OFT To Investigate Debt Management Companies
Over the course of the past couple of years or so, since the beginning of the credit crunch, there has been a growing incidence of borrowers getting into financial difficulty with their personal loans, home owner loans and other debts.
Many individuals have been able to resolve the situation themselves in connection with their loan provider, others have turned to free, charitable debt advice centres for assistance. The other option for someone struggling with debt is to consult a debt management company, who will deal with all the various loan companies and other creditors, arranging a single payment for the borrower, in exchange for a fee, which is usually included within the monthly payment amount.
Not surprisingly, there has been a significant increase in the number of companies offering such services, in order to meet the needs of those borrowers struggling with their loans and the Office of Fair Trading (OFT) has now said that it intends to investigate the activities of these companies. The focus of the investigation will be directed at the marketing aspect of debt management companies and their advertising material, particularly via the internet.
The OFT’s concern is that, whilst there are many reputable debt management firms operating in the UK, some companies are publishing misleading advertising material which suggests the firm is a charitable organisation and does not draw sufficient attention to the fact that there could be substantial fees payable.
The OFT’s investigation is intended to flush out any rogue companies and take enforcement action against them. Any firm failing to comply may face large fines or have their Consumer Credit Licence revoked. The OFT is currently taking action against 24 debt management firms, all of whom are advertising themselves either as charitable organisations, or Government bodies. This still leaves around 150 other such companies which are operating in a compliant and reputable manner.
