35 debt management firms have been forced to surrender their consumer credit licenses following a compliance review by the Office of Fair Trading (OFT).
Another 15 are facing licensing action: eight have been informed that the OFT intends to revoke their license, while another seven are still under investigation having failed to respond. All 15 firms will have a right to make representations to an adjudicator before a final decision is made. A further 79 firms have submitted audit reports following a request from the OFT for evidence of compliance measures by 16th December 2010. The OFT warned 129 firms in September 2010 after its review of the sector found widespread problems with compliance. The OFT has also updated its debt management guidance due to unfair business practices identified in the review.Ray Watson - Director of the OFT’s Consumer Credit Group - said:'We are determined to improve standards in this sector, as the failings identified by our review are unacceptable. Companies providing debt management services should be in no doubt that we will act against bad practice and ensure consumers are protected.'News of these steps taken by the OFT coincides with a joint report released by the British Bankers’ Association (BBA) and Accenture proposing a new streamlined system for assisting people who find themselves in financial difficulties. Personal debt in the UK has reached nearly £1.5 trillion, and during the second quarter of 2010 banks wrote off £3.5 billion of consumer borrowing, up from £2 billion during the first three months of the year. Personal insolvency rates have also risen to record levels.The report – titled ‘A New Model for Dealing with Personal Debt’ - calls for greater consistency in the way debt advice is given and how creditors deal with customers with financial problems. It recommends several key changes, including: · The creation of a single body to regulate debt advice, with a single debt management license· Better use of customer information to identify people at risk of falling into debt to facilitate early intervention and resolution· Improving financial education and providing a single online debt advice portal. Paul Ross - BBA policy director and co-author of the report - said: “Our vision is to provide a clear and coherent process to help people facing debt difficulties, to intervene early where possible and to provide a simple debt resolution solution if those early attempts do not succeed. We want to unravel the red tape to bring about a more financially responsible solution for customers. “Customers are currently faced with too many confusing options for resolving their debt, and may set out too early on expensive legal procedures when a more common sense approach would be better for everyone.”David Parker - senior executive in Accenture’s Financial Services operating group and co-author of the report – said: “As the Government considers changes to consumer credit regulation, now is the right time to get real change under way and ensure that there are effective safety nets for consumers in financial distress. “The changes we are proposing will have a fundamental impact on the way debt is managed through the rehabilitation of debtors and the prevention of new or repeated debt behaviour. However, agreement to implement a new debt management framework must be reached by all relevant stakeholders, including the government, regulatory and advice bodies, as well as lenders and borrowers.”Manchester debt firm is liquidated owing creditors over £2.2m
Wednesday 11th August 2010
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