Phil MeekinView Profile
Debt management companies are fee-charging firms that provide advice and solutions to people with debt and financial problems. Racked with worry, most consumers feel very vulnerable in this situation
The Office of Fair Trading has issued formal warnings to 129 debt management firms. By requiring them to comply with its Debt Management Guidance within three months or face licensing action. This is a significant proportion of the 300 to 400 firms active in this area. A damning report into the state of the sector highlighted widespread problems. These include misleading advertising and poor advice to those in debt.
Debt management companies are fee-charging firms that provide advice and solutions to people with debt and financial problems. Racked with worry, most consumers feel very vulnerable in this situation. The OFT issues guidelines to these companies regarding the way they operate their businesses. It is an area where most people have limited knowledge of what options are available along with the fact it is open to misuse. All such businesses require a Consumer Credit License to trade. The debt management companies involved face losing their license to operate in the UK. This is unless they take immediate action to comply with Office of Fair Trading.
There has been an issuing of warning letters following a mystery shopping exercise. Many failed to give information on all of the debt solutions that were available. While companies tended to suggest the solution most profitable for them, rather than what was best for the consumer. A statement issued by the OFT states that misleading advertising is one of the main problems, with many firms claiming their service is free when it is not. In the worst cases, groups were using misleading trading names to make it appear that they are charities or government bodies. In other cases, firms sought to mis-represent or discredit the services provided by charitable debt advice groups.
So, if you or somebody you know is worried and over-burdened with debt, how do you know where to obtain sound advice? There are safe options including debt-advice charities such as the Consumer Credit Counselling Service, Money Advice Trust or Citizens Advice Bureaux. Or you can approach a firm of Licensed Insolvency Practitioners, such as Wilson Field. Whilst these are profit-making organisations, they are very experienced and their activities are closely regulated.