Thirty five debt management companies are to cease trading after giving up their consumer credit licences, following an audit conducted by the Office of Fair Trading (OFT). An additional 7 firms have been told their licences are to be removed, another 8 are still the subject of ongoing investigations and a further 79 had submitted further documentation for consideration
With a warning issued to the industry in September by the OFT about unfair practices, many firms have failed to clean up their act, with the consumer watchdog finding a whole host of misleading processes and poorly trained staff amongst the culprit firms. Some of the worst offences included implying that the firm was part of a government run initiative or charity (when in fact they were a profit-making organisation) by using deceptive trading names, as well as suggesting that all services offered were free. The audit also discovered that many so-called advisors were unable to provide a competent service and frequently did not collect sufficient data to offer the correct advice.
Director of the OFT’s consumer credit team, Ray Watson, said: "We are determined to improve standards in this sector, as the failings identified by our review are unacceptable. Companies providing debt management services should be in no doubt that we will act against bad practice and ensure consumers are protected."
As well as removing the licence to trade for many companies, the OFT is also in the process of issuing new guidance notes for the sector, with tough guidelines covering many of the shortfalls found in the audit.
The problems the OFT discovered were by no means isolated, with the Financial Ombudsman Service also confirming it had seen the amount of complaints regarding debt management companies more than treble in the last twelve months.