The Office of Fair Trading (OFT) has amended its Debt Management Guidance that covers the standards it is expecting from organisations that furnish debt management advice or deliver credit repair services to people. Businesses include organisations or individuals that don’t charge for their assistance or are non-profit seeking, which include charities. The guidance was originally published in 2001 and was updated in 2008 and it sets out the benchmarks for the industry.
The current version differs from older versions insofar as it provides plenty of examples of ‘unfair or improper practices’ which if engaged in, could possibly render a business unfit to hold a consumer credit license and thereby not be able to function in the market.
The general theme of the guidance is the importance of businesses to be transparent in order that clients have all the knowledge essential for them to arrive at assured judgements with regards to the most suitable debt solutions for them, given their financial position.
Firms that fail to keep to the requirements laid down put themselves at risk from enforcement measures by the OFT that could cause the most significant sanction of losing their consumer credit license. Failure to stick to the published standards could be thought of as participating in unfair or improper business practices, whether illegal or not, and could be regarded as evidence leading to formal OFT action.
The OFT highlights three unfair practices which it has cracked down on
in recent years: sending unsolicited marketing text messages, emails or
voicemails; making false or unfounded claims with regards to the status
of the debt management business, such as operating websites which look
like the website of a charity or of a government body and even
incentivizing debt advice staff to the extent that they may promote
inappropriate debt management products for personal financial gain.
Businesses are also expected to point people in certain situations to
not-for-profit advice organisations for further help and to keep robust
measures set up to identify and deal with vulnerable individuals, such
as people who have mental capacity challenges.
The guidance
also encourages borrowers to proactively engage in the debt recovery
operation by especially communicating appropriately and regularly with
their creditors either directly or through their appointed
representative. Current and correct information and facts ought to be
imparted in particular concerning any change in circumstances that could
be likely to appreciably impact on the ability of the debtor to fulfill
their repayments.
Marketing, client communication, the
quality of advice proffered, supply of pre-contract facts, consumer
agreements, consumer information documents and the nature of the debt
management program itself are the primary things targeted under the
heading of Unfair or Improper Business Practices.
The 96 pages
long document furthermore lays out the Fitness to Practice standards
needed plus the scale and reason for the guidance. It sets out the
Overarching Principles of Fair Business Practice and the OFT’s approach
to Regulatory Compliance and Enforcement.
Following last
year’s OFT clampdown on dodgy debt management companies, 87 firms
departed the market and it is probable that the upgraded standards
spelled out in this document will result in a further shakeout in the
sector, due to the higher cost of compliance. While there could be a
loss in competition, it is certain that debt management will be a a
great deal more attractive and safe experience for the financially
burdened individual to avail of. The full document can be seen on or
down loaded from the OFT website at www.oft.gov.uk/