Debt management industry review
Updated on 03 November 2009
A review of the debt management industry has been launched to ensure firms are treating customers fairly.
The Office of Fair Trading will look into the practices and adverts being used by debt management companies, as well as how well the firms are complying with its guidance on minimum standards.
The review is being launched following a recent increase in enforcement procedures the OFT has taken against debt management firms, with action taken against 24 companies since April 2008, including revoking firms' credit licences.
The group has also warned the industry over using mis-leading mailings and advertising, illegally cold-calling consumers and setting up websites to look as though they are run by the Government or charities.
The OFT said tackling problems in the rapidly expanding sector was a high priority, as consumers who were struggling to keep up with their borrowings could end up worse off as a result of being sold costly debt remedies that were inappropriate for their needs.
The review will look at the online advertising debt management firms use, while it will also seek comment from third parties, such as debt charities, on how well firms are complying with its guidance.
Debt management firms will be asked to fill in a questionnaire and consumers who want to complain about a firm will also have their say. Ray Watson, OFT director of consumer credit, said: "A recent increase in formal OFT enforcement action, rising complaints and new problems emerging in the market suggest that some businesses are still not meeting minimum standards. This review will help us identify those practices that are harming consumers, as well as the reasons for non-compliance, and will help us target our enforcement action."
The debt management industry has changed significantly since the OFT last carried out a compliance review in November 2003. The sector has become increasingly complex with a rapid increase in new entrants and diverse business models, including internet-based firms.
In September, the Government said it was considering regulating debt management companies to ensure that both consumers and creditors were being treated fairly.
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