New Measures Released for Debt Management Companies
Debt management companies are being targeted with new measures to prevent their charging practices causing problems for vulnerable indebted consumers.
The Office for Fair Trading revealed the series of measures to target credit brokers and debt management companies in response to concerns about the impact of their marketing on customers.
The Office is publishing guidance on the standard it expects of credit brokers, and on debt management, in response to a super-complaint from Citizen Advice.
It is estimated that 270,000 UK consumers paid an upfront fee to a sub-prime, unsecured credit broker in the last 12 months, typically between £50 and £70, on the expectation of being offered an unsecured loan.
“Our evidence suggests some businesses are deliberately taking people’s money upfront with no realistic expectation of finding them the type of loan they need,” commented John Fingleton, OFT Chief Executive.
Complaints to Consumer Direct about these upfront fees have more than doubled between 2008 and 2010, possibly highlighting the increasing problem of debt in our society and the unscrupulous behaviour of independent debt management companies.
“These firms are taking people for a ride persuading them to buy products and services they can ill afford,” said Delroy Coinaldi, Consumer Credit Counselling Service External Affairs director.
“We must continue to be vigilant for, and deal with, these exploitative practices. There is no need for anyone to pay for debt advice when CCCS has capacity and all our services are free.”
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If you have debt you are struggling to pay back, before taking out a loan it may be a good idea to try and budget spending to leave some cash aside for these repayments.
A prepaid card is a good tool to aid this process as the card does not allow the user to spend more than that which they loaded onto the card.