Debt Management Companies Targeting the Vulnerable

Debt management companies are fee-charging firms that provide advice and solutions to people with debt and financial problems. Getting into debt can be a very troubling experience, and most consumers suffering will likely feel under pressure and very vulnerable in this situation.

Consumer Credit Licenses

The Office of Fair Trading (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 it being open to misuse. All such companies require a Consumer Credit License to trade. If the debt management company is found in breach of the guidelines, they could face losing their license to operate in the UK unless they take immediate action to comply.

Misleading activities

Huge problems have been highlighted within the sector, with firms offering poor advice to those in debt and misleading with advertisement.

Following an undercover examination in the sector, the OFT issued warning letters. Many of the firms failed to provide information on all the available debt solutions, and companies tended to suggest the solution most profitable for them rather than what was best for the consumer.

Formal warnings

The OFT issued a statement concluding that misleading advertising is one of the main problems; with many firms claiming to offer free services that are 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 misrepresent or discredit the services provided by charitable debt advice groups.

The OFT previously issued formal warnings to 129 debt management firms; a significant proportion of the 300 to 400 firms active in this area. The warnings required them to comply with its Debt Management Guidance within three months or face licensing action.

In summary

While debt management firms are profit-making companies, they still need to offer advice which best fits the consumers’ needs, rather than what would make them the most money. It’s vital that if you are facing financial problems, you work with a reputable firm who are looking out for your best interests as appose to theirs.