OFT Announce Revised Debt Management Guidance

The Office of Fair Trading (OFT) has estimated commercial fee charging debt management companies (DMC's) make £250 Million a year from over-indebted clients.

Since the last review issues have continued to be raised over advertising and marketing practices as well as the quality of advice given by these firms.

Following the OFT's earlier review, 129 warnings were issued to DMC's while a further 67 warning letters were sent out. The OFT has since claimed 87 firms have left the market either voluntarily or due to enforcement action.

However, there remains concern over the quality of the management advice in this sector where there are "vulnerable consumers".

The new guidance looks to clamp down on firms making "false or misleading claims" about the business such as operating websites which appeared to be run by a Government of a charitable body.

Any "unfair or improper practices" could lead to the loss of a firm's consumer credit licence. Among the practices identified were the sending of unsolicited text messages, email or voicemails and the issue of inappropriate financial incentives to staff giving debt advice.

The latest guidance has been welcomed by the two leading trade associations for the industry: The Debt Manager Standards Associate (DEMSA) and the Debt Resolution Forum (DRF). The pair together represent some 46 DMC's and aim to promote professional standards in the industry.

written by Tim Corfield
Griffin and King

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