OFT Highlights Catalogue of Poor Practices by Debt Management Firms Who Make Bad Credit Problems Worse for Consumers
Up to a third of the UK’s debt management firms have been left trembling behind their desks after the Office of Fair Trading (OFT) found them to be charging fees and giving out advice that forced their clients into further debt and bad credit problems.
The OFT launched an 11 month investigation into the sector following concerns that some ‘cowboy’ outfits were abusing their level of trust and exploiting vulnerable customers with bad credit problems.
“Debt consolidation is meant to help families in serious bad credit circumstances who can’t get a bad credit debt consolidation loan” said a spokesperson for Bad Credit Loans 4 You, a UK specialist at sourcing Bad Credit Loans, “these companies are effectively robbing from the poor to give to the rich”.
The Financial Ombudsman Service received 394 complaints about debt management firms last year, compared to only 163 the year before.
Yesterday the OFT issued a formal warning to 129 rogue firms, a large proportion of the 300 to 400 debt management businesses estimated to be trading in the UK, that they will lose their consumer credit license unless they immediately begin to fall within their guidance.
Almost all of the companies which were scrutinised during a mystery shopping assignment, failed to provide information on all of the debt solutions available to a consumer with bad credit debts.
Instead, companies tended to suggest a solution which was most profitable to them without considering what was appropriate for the customer’s particular circumstances.
The OFT claimed that some management companies appeared to operate on a business model which ensured they retained a maximum amount of money from consumers, regardless of their bad credit circumstances.
An abundance of poor practices were uncovered when advice was offered to those struggling with serious bad credit debts, with many companies focusing more on profits rather than providing their clients with an effective means of resolving their bad credit debt solutions.
The OFT highlighted a series of significant issues with many of the firms advertising techniques, most of which was seen to be misleading customers into believing their service was free when it was not.
Advisers were also found to be lacking in competence and provided particularly poor advice without collecting enough information on their client’s personal bad credit circumstances.
Many firms were also found to be front-loading their fees which reduced the amount of the consumer’s money that went towards helping their bad credit by repaying their debts.
Some business’s were found to be deliberately ‘recycling’ customers from one debt solution to another in order to earn more fees and extract the maximum profit and some consumers might have taken out a bad credit loan to pay for them.
The OFT also believed there to be a lack of transparency for consumers with many firms not making the commercial nature of their business clear.
In what was said to be some of the worst cases, firms were using misleading trading names which made them difficult distinguish between fee-charging firms and charities or Government bodies.
Some firms were even found to misrepresent or discredit the services supplied by charitable debt advice groups.
The OFT plans to update its guidance in conjunction with the Debt Managers Standards Association and the Debt Resolution Forum in light of their recent findings to raise standards in the industry.
Director of the OFT's consumer credit group Ray Watson, said; “People who are heavily indebted, desperate and vulnerable need advice which makes their problems better not worse and should not be exploited.”
“Debt management firms must be clear about their charges and the options available to consumers. The level of non-compliance we found across the industry is unacceptable. We are also looking to the two main industry bodies to lead the way in raising standards and to meet their commitments to make the industry more professional and responsible.”
Action has been taken to address companies posing as charities, systemic cold-calling and the miss-selling of IVA’s.
Bad Credit Loans 4 You helps out people who fear they have been blacklisted because of CCJ’s and Defaults.
Bad Credit Loans 4 You holds a Consumer Credit Licence issued by the Office of Fair Trading. The company is also covered by the Financial Ombudsman.
Bad Credit Loans 4 You is also registered with the Information Commissioner’s Office for Data Protection.
For help, phone 0800 011 4503 or visit
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Notes for Editor:
Loans 4 You of London Ltd
Innovation Centre
Monks Brook
PO30 5WB
United Kingdom
Tel: 0800 011 4503
Bad Credit Loans 4 You was formed in April 2010, bringing together a team of specialists that together offers over 50 years of expertise to help applicants gain the unsecured loans they need.
From its UK head office in Monks Brook, Loans 4 You operates across Britain, sourcing loans for people with bad credit.
Bad Credit Loans 4 You holds a Consumer Credit Licence issued by the Office of Fair Trading. The company is also covered by the Financial Ombudsman.
Bad Credit Loans 4 You is also registered with the Information Commissioner’s Office for Data Protection.
Bad Credit Loans 4 You has a senior management team with over 50yrs collective experience providing vital knowledge of the bad credit loans sector & helping those with CCJ’s, defaults, late credit card payments, mortgage arrears & other bad credit rating problems.
Our mission is to aid people who have been discriminated against because of their bad credit loans problems. We assess bad credit loans applications on your current budget and ability to repay bad credit loans, not just your bad credit rating.
