Here are some of the comments and reactions to the release of the new OFT Debt Management Guidance.

The Office of Fair Trading (OFT) have released the Debt Management (and credit repair services) Guidance.

The document is the result of extensive consultation with the Debt Management industry is available here:

ClearDebt will be commenting on the findings shortly.

ClearDebt welcomes the report on Debt Management and other consumer credit matters issued today by the House of Commons Business, Innovation and Skills Select Committee and endorses the comments made on it by Debt Resolution Forum’s chairman, and CEO of ClearDebt, David Mond, who said:

This report is published at a time of great change in debt resolution, with new guidance from the OFT expected shortly, with changes in funding and access to debt advice being put forward by the Money Advice Service and with the possibility of the development of a protocol compliant or regulated debt management plan being put forward by the Insolvency Service.

“Little of this has been taken fully into account by the committee’s report.

“However, the DRF welcomes a number of the committee’s recommendations, including powers for regulators to ban harmful products and a fast track procedure to suspend credit licences. The DRF believes the latter would be best achieved by properly resourcing the OFT and its successor, the Financial Conduct Authority (FCA), rather than introducing a fast-track procedure that could lead to compliant businesses having licences suspended without due process, something that would almost certainly force a viable business into insolvency.

“DRF supports full transparency regarding debt management companies’ fees, something that has been achieved by the members of trade associations like DRF. We do not however support the phasing out up-front fees, which effectively remunerates companies for the high proportion of the work that is done at the beginning of any debt management plan in setting them up.

“The DRF wholeheartedly welcomes the committee’s recommendation that there should be an effective audit of debt resolution companies’ client accounts. Industry practice in this area is not consistent and could lead to real consumer harm in the event of a company’s insolvency. The DRF will be putting forward standards to address this”.

DRF spokesman and ClearDebt marketing and external affairs director, Andrew Smith, made the point in evidence to the committee that a clear danger to consumers was businesses which didn’t operate their client accounts properly.

Hear Andrew Smith’s november 2011 statement to the Committee:

The Committee recommended that there should be effective auditing of client accounts. For ClearDebt, that means:

• All client funds are paid into client accounts
• Clearly designated client accounts which the bank MUST treat as ring-fenced for clients (i.e, in the event of insolvency the bank could not set off monies due to them against these accounts)
• No interest accrues on the balances
• No bank charges are debited to the client accounts.
• Monthly reconciliations are performed to show that there are sufficient monies in the client account to cover all liabilities

The Business, Innovation and Skills Committee (BIS) has published a report into Debt Management examining payday loans and debt management companies. The report makes recommendations for future Government action.

Source: UK Parliament

A report into payday loans and debt management companies has been published today by the House of Commons Business, Innovation and Skills Committee. (BIS)

The report details areas of concern with regards to payday loan and debt management companies and contains recommendations for Government action.

Citing a November 2011 Personal Debt Snapshot report by R3, the insolvency trade body, that details the extent of consumer worries over debt, the BIS report raises the following concerns about debt management companies:

• The Government must work to phase out up-front fees – the provision of guidance on this point by the OFT is inadequate.
• The Government introduce the necessary regulations to ensure companies publish the cost of their debt advice and their outcomes, if an agreement cannot be reached during discussions with the industry.
• The Government should establish effective auditing of Debt Management Companies’ client accounts.

Committee chair, Adrian Bailey MP states:

Greater transparency in the commercial debt advice market will benefit consumers hugely.

The Committee feels that voluntary codes of practice are highly unlikely to achieve this aim.

The Government must be prepared to regulate if consumers are to receive the protection and the level of information they require.

The BIS report also covers the regulation of debt advice, the Money Advice Service, and payday loan companies and includes statements from a panel of industry representatives including Andrew Smith, Director of Marketing & External Affairs at ClearDebt and spokesperson for the Debt Resolution Forum.