It’s regrettable (but inevitable) that most of the coverage about the OFT’s latest announcement on action they are taking against some fee-charging debt management companies implies that the whole industry is in a terrible state. In fact, it is a major step forward in creating an industry consumers can trust – and it’s a process which the industry is working hard to bring to fruition – quickly.

OFT crackdown on debt management companies

Speaking as a director of ClearDebt (a fee-charging debt resolution firm – and proud of it) -and as spokesperson for one of the industry’s two trade associations (Debt Resolution Forum) I believe that what the OFT is doing, a fee-charging debt resolution industry, which consumers and creditors can trust is going to be needed.

The OFT’s action has driven out a number of dilettantes and those who can’t be bothered to accept a burden of regulation. It seems to have found a number of rogues too and is dealing with them.

The industry itself is shaping up – fast. First, the OFT’s requirement for an audit of compliance was historic – in most case it related to trading standards reviews made between autumn 2009 and spring 2010 and, for many firms, their response to the OFT was confirmatory – the changes required had already been made.

Debt management company regulation

Secondly, there is real commitment, from a large section of the industry, to all the regulation that’s necessary to remove consumer detriment. Debt Resolution Forum (DRF) offers an advanced BTEC (the Certificate in Debt Resolution – CertDR) requiring more than 210 hours study and with three examinations: Members have to commit to their client facing staff either taking this or being trained to an equivalent standard. All our staff who deal with clients have to obtain this qualification.

DRF also requires members to go through an annual independent audit from the Insolvency Practitioner’s Association (a regulator trusted by government). This is a five day process in the first year (three days in years two and three – and then back to the five day review).

DRF has an independent complaints panel with a majority of members from outside the industry. chaired by David Hawkes, National Money Advice Co-ordinator of Advice UK. The complaints’ panel’s decisions are binding on members.

It’s early days for both these initiatives but the commitment is there.

And the OFT will continue to challenge us: We’ll shortly see a consultation on new debt management guidance that will raise the bar further.

The cost of free debt advice

Why bother though, with all the free advice that’s available. Well first, free advice is not always best advice (but I recognise that I would say that – wouldn’t I). More to the point, the free sector has a capacity issue, they themselves say they could only deal with half the enquiries they received.  Now, after Citizen’s Advice’s announcement of up to 900 redundancies, their capacity is slashed.

Then, the government’s attitude is changing. “Free” debt advice is often taxpayer funded – so not free at all. And many debtors can actually afford the fees they pay – as can (and perhaps should) their creditors. Most creditors factor the cost of defaulters into each product when they design it. So any debt recovery the banks and credit card companies make is actually bunts. Why not squeeze their margins a little and get them to share, with the debtors, the cost of debt advice and resolution? This does seem signposted by the Department of Business Innovation and Skills/Treasury call for evidence on credit and debt regulation.

So – what we are seeing is the rapid evolution of an industry sector from unregulated and seen as unhelpful to consumers to well-regulated and a required part of the UK economic scene. After all, we have an economy partly fuelled by consumer spending and you need credit to spend (nobody saves anymore). More credit means more debt.

Seems, in people’s financial lives, there is nothing certain except debt and taxes.

Links to other comments:

• Guardian
• Thisismoney
• Money Marketing
• The Independent

ps. On a related note, if you are interested in checking the license of a debt management firm, ClearDebt have made a screencast showing you exactly how to do so.

This week, the OFT announced a crackdown on the debt management industry, singling out 129 debt management companies who needed to make improvements or face being closed down.

ClearDebt’s marketing director Andrew Smith spoke on behalf of the Debt Resolution Forum (DRF) to BBC Radio and discussed the issues surrounding the OFT report. You can hear his views as broadcast on Radio 4 and Radio 5 by clicking below:

the quality of advice and the competence of people who give advice is an issue,
that’s why DRF members have to train their staff to the standard of a qualification we introduced just over a year ago – an advanced btec in debt resolution

11% of households in this country have a debt problem, the debt problem is about twice as big as the charitable sector can deal with, so it’s really important that the industry works with the OFT

Today the Office of Fair Trading made an important announcement about the repercussions of non compliance with its Debt Management Guidance.

Please note the views expressed above are curated from the internet in realtime and do not constitute financial advice. The content below is republished adhering to fair use principles of citation with attribution to the original creators. All the content included on this story below, including all the text, graphics, photographs, graphs, sounds, data, images may be subject to copyright. ClearDebt is not responsible for the content of external websites.

Leading Debt solution expert, ClearDebt are delighted to have been thanked by the OFT (Office of Fair Trading) for alerting them to three of the companies who are now being investigated for promising consumers to buy off their credit card debt and relieving them of any legal obligations to payback their creditors.

OFT issues warning to consumers over debt agencies offering to buy or sell debt

• ClearDebt thanked by the OFT for identifying three debt scam companies

• OFT and local trading standards services prosecute several agencies for unlicensed trading

Leading Debt solution expert, ClearDebt are delighted to have been thanked by the OFT (Office of Fair Trading) for alerting them to three of the companies who are now being investigated for promising consumers to buy off their credit card debt and relieving them of any legal obligations to payback their creditors.

Andrew Smith, Marketing Director of ClearDebt comments:
“We are very aware of how vulnerable consumers can be when burdened by debt. Because of that we feel it’s our responsibility to ensure our company and any other which is providing a debt solution service, is acting in an honest manner. To do otherwise, is doing the unthinkable to people’s livelihoods.”

The OFT is warning consumers that the law does not allow the sale of debt without the lender’s permission and businesses suggesting otherwise are intentionally misleading them. The OFT go on to say that any consumers choosing to take their chances with one of these agencies, either directly or through a broker, will still be liable for their original repayment obligations as well as losing the money they paid for this false service, and any debt collection activity or negative credit scoring associated with the original debt.

Whilst investigating the number of companies involved in these “scams” the OFT has discovered many are working without a consumer credit licence and have started prosecution proceedings against them for unlicensed trading.

Ray Watson, OFT Director of Credit, said:
“’Like most scams, when something looks too good to be true, it usually is.” “The OFT will not hesitate to take swift action against businesses which deliberately mislead consumers”.

- Ends –

For advice on debt solutions, consumers can call ClearDebt FREEPHONE 0800 0192 095
For further information contact: Jacqueline Cohen on 07976 739 125, jacqueline.cohen@cleardebt.co.uk / Andrew Smith at andrew.smith@cleardebt.co.uk

In the world of superheroes, Batman, Spidey and Superman always save the day.  And even if we want to include the females in this sacred group – SuperGirl won her battles fair and square.

So it’s good to see that justice can win the day, even in the real world!

Loosing their latest battle, the bulging banks are throwing their toys out of their pram as they panic over the OFT decision, confirming millions of pounds in bank fees are to be returned to the consumer.

Calculators will be working overtime as banks panic about the effect on their industry this will have, and to counteract the situation, they’re already creating brand new accounts to dazzle us with, which on further investigation have hidden costs.  If blinded by the freebies and missing the small print, it seems sign ups to these accounts may be the solution to all their problems – rather than paying us back out of their own pocket, they can use ours.

I suspect that in reaction (the words “knee” and “jerk” come to mind) to loosing the bank charges battle, these new accounts which offer daily overdraft charges and monthly maintenance fees will help us, help them, raise the monies needed to pay us back our bank charges.  How kind of us, I know. ;)

BBC’s money reporter, Louise Greenwood, claims both Halifax Bank of Scotland and Alliance and Leicester have launched attractive current accounts offering cash bonuses of up to £100 for setting up or using the account – a very attractive carrot to dangle for those feeling more than the “pinch”.

But as the saying goes, what looks too good to be true…is too good to be true.  Mistaking the consumer for Dumb and Dumber, the banks think they can dazzle us with cash rewards for signing up with them and then hammer us with daily overdraft charges without us even noticing!  Or getting us to use pay monthly accounts which offer benefits we may never use! Is that the best they can come up with? Do they really think we won’t make the connection between the end of free banking and the newly introduced fees?

It seems, that as the banks loose one battle, they start another…never knowing when to stand down and make peace with the consumer so we can work together to create a stronger relationship with a win/win result.
Have they never watched the movies we all love to see?  Do they not know what happens in each and everyone of them?  The people always win over the corporates…the heroes always beat the villains and justice wins every time.