The OFT has identified a number of concerns in relation to the debt management industry. The consumers may be vulnerable and the issues which confront them can be complex. There are a number of government and charitable organisations which provide free debt advice and solutions and a consumer should be able to receive the advice and solution most suitable to their circumstances. The potential for large amounts of profit by the commercial sector creates a risk of abuse.
Trading Standards Officers conducted onsite visits, a website sweep and a mystery shopping exercise. They found that:
- Misleading advertising is the most significant area of non-compliance, in particular failing to disclose fees and misrepresenting debt management services as being free when they are not;
- Frontline advisers working for debt management companies are lacking in competence and are providing poor advice on inadequate information;
- There is low industry awareness of the Financial Ombudsman Service (FOS) for resolving consumer complaints.
The OFT plan to update their Debt Management Guidance and will carry out robust enforcement action against licensees that fail, or refuse, to change advertising and/or behaviour.
Attached is a link to the detailed report http://www.oft.gov.uk/shared_oft/business_leaflets/credit_licences/OFT1274.pdf and the Debt Management Guidance http://www.oft.gov.uk/shared_oft/business_leaflets/credit_licences/oft366.pdf.