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Thirty-five debt management firms shut down

Thirty-five debt management firms shut down

Category: Debt

Updated: 28/01/2011
First Published: 28/01/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Thirty five debt management firms have surrendered their licences as a result of a crack down by the Office of Fair Trading (OFT).

In September last year, the OFT warned more than a hundred debt management firms that they faced closure after an investigation found that vulnerable people were being misled and exploited for money.

Unlike free Government funded and charitable services, debt management firms charge fees to provide advice and solutions to people badly in debt.

Many firms were found to have tried to charge people the maximum amount of money, regardless of circumstances, while poor advice was also a problem.

The OFT said at the time that firms risked being shut down if they did not improve standards.

Of the 129 companies that were told to review their operations, 35 have given up their licences, while a further eight firms have been informed that the OFT intends to revoke their licences.

Seven debt management companies did not respond to the OFT and are being investigated.

"We are determined to improve standards in this sector, as the failings identified by our review are unacceptable," Ray Watson, director of the OFT's Consumer Credit Group, said.

"Companies providing debt management services should be in no doubt that we will act against bad practice and ensure consumers are protected."

The Consumer Credit Counselling Service (CCCS) said it is very concerned about the continuing problems in the fee-charging debt management sector.

"Those struggling with debt are often stressed and confused about their situation and need clear, independent advice and support of the highest standards," Delroy Corinaldi, CCCS external affairs director, said.

"It appears that this is still not the case within the fee-charging debt management sector."

Debt advice specialists such as the CCCS and Debt Free Direct will offer free and impartial advice to those with debt problems.

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