Credit repair companies told to be more helpful and transparent

Posted in 'Dealing with Debt' by Jessica Searle

08 June 2012

The Office of Fair Trading (OFT) has published a set of revised guidelines for those businesses offering debt management advice or credit repair services.

Building upon previous guidelines, this outlines examples of 'unfair or improper practices' which can render a business unfit to operate within the market and hold a consumer credit licence.

“All too often it may be particularly vulnerable consumers who fall victim to poor-quality debt advice, and we will continue to take action against businesses that fail to follow our guidelines,” says David Fisher, Director of Consumer Credit at the OFT.

Following the introduction of these guidelines the OFT has been true to their word, issuing 129 warnings to debt management businesses, with 87 having exited the market both voluntarily and through enforcement action; and a further 67 warnings letter having been issued to other companies.

Examples of unfair practices as outlined have been listed as:

→ Sending unsolicited marketing text messages, email or voicemails

→ Providing inappropriate financial incentives to staff giving debt advice, which may encourage them to promote unsuitable debt management products for personal gain

→ Making false or misleading claims regarding the status of the business, for example by operating websites which look like the website of a charity or a governmental body.

There is also an expectation for consumers to be advised of the various not-for-profit organisations which might be able to offer help, as well as having measures in place to identify and protect vulnerable clients, such as those with mental capacity issues.

The OFT is looking for 'transparency' from these companies, asking them to not only try to sell their own products, but give advice which is in the best interests of consumers.

Many people who find themselves in financial straits are often not aware of free alternatives and other advice available to them. The OFT fears that they do not bother to shop around after arriving at, for lack of a better phrase, the “first port in a storm”.

So the message from the OFT seems simple for consumers - do not take the first 'get-out' option offered by companies - do your research – and for more advice contact free advice services such as those available on www.direct.gov.uk.

Jessica Searle is a Credit Analyst at checkmyfile and has a degree in English Literature from the University of Exeter. You can contact her at jessica.searle@checkmyfile.com