The OFT has told 129 debt management firms that they face losing their consumer credit licences unless immediate action is taken to comply with its Debt Management Guidance.
The firms are required to provide independently audited evidence within three months that action has been taken to address identified concerns. If evidence is not provided, the OFT will instigate licensing action.
The formal warnings follow an OFT review of the debt management sector, published today, which found widespread problems.
The review, which included onsite compliance visits by Trading Standards Officers, a website sweep and a mystery shopping exercise, found that misleading advertising is the most significant area of non-compliance, in particular failing to disclose a fee is retained by the business and misrepresenting debt management services as being free when they are not.
It also established that frontline advisers working for debt management companies are lacking in competence and are providing poor advice based on inadequate information and there is low industry awareness of the Financial Ombudsman Service (FOS) rules for resolving consumer complaints.
Today’s OFT report sets out a detailed action plan to improve standards across the industry, focusing on robust enforcement action against licensees that fail, or refuse, to change advertising and/or behaviour.
The OFT also plans to update its Guidance to take explicit account of new and emerging unfair business practices, and will work with the two main trade bodies, the Debt Managers Standards Association (DEMSA) and the Debt Resolution Forum (DRF) to support their initiatives to introduce higher standards into the industry.
Ray Watson, director of the OFT’s Consumer Credit Group, said: “People who are heavily indebted
