Debt management under spotlight

04th November 2009

A watchdog is to put the largely unregulated UK debt management industry under the spotlight to ensure fair treatment for customers.

Cases of misleading advertising and poor debt advice have prompted the review by the Office of Fair Trading.

Companies in the sector tend to negotiate on behalf of consumers to reduce their debt burden.

But fees are added to the repayment amount and vulnerable customers can end up in a worse financial position.

About 100,000 debt management agreements are reached every year in the UK.

The OFT said that the sector had become increasingly complex, featuring many new businesses and more online advertising, as a growing number of people sought debt advice.

This review will help us identify those practices that are harming consumers

Ray Watson, OFT
This has come hand-in-hand with a rise in complaints, warnings about illegal cold-calling and the emergence of copycat websites that look as though they have come from the government or debt charities.

As part of the review, consumers will be asked to fill in a form online if they have concerns about certain companies.

"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," said Ray Watson, OFT director of consumer credit.

"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."

The results of the review will be published next year.

Separately, the Ministry of Justice is consulting on whether a code of practice or formal regulation should be introduced into the debt management industry.

It is expected to conclude in December and the government will make an announcement early next year.

Source: BBC