The Office of Fair Trading (OFT) has taken action against a company for making misleading claims in its advertising that suggested it was a debt charity.
The trade body told Money Advice Direct Limited, a debt management lead generation firm, that it was concerned about content in its marketing material and on its website that encouraged consumers to believe that it was a not-for profit-organisation offering debt management services.
Money Advice Direct Limited, which traded as The UK Insolvency Helpline, is a commercial business that passes the details of debtors on to paid-for debt management companies in return for a fee.
The OFT compelled the company not to imply that it is a publicly funded body or a debt charity and to make clear to potential customers that it does not “provide or administer debt solutions”. It must also not give the impression that its advice is impartial or independent and “ensure advertising of its debt management services is consistent with the standards set out in the OFT’s Debt Management Guidance.”
Ray Watson, the OFT’s director of consumer credit, said: “It is important that consumers seeking help for debt problems know who they are dealing with and whether the company is providing an actual service or is simply a lead generator.
“We would advise anyone in financial difficulty to seek free debt advice or check whether the company they are in touch with is a member of the Debt Management Standards Association, which has an OFT-accredited code.”
The regulator also wants the firm to change its trading name and intends to refuse its application to add the domain names “www.ivahelpline.co.uk” and “www.insolvencyhelpline.co.uk” to its license. It is thought that these names make the company sound to official.
Martyn Saville, Which? credit and debt expert, said: “A quick Google search for debt advice throws up a variety of sponsored links from commercial debt management companies and lead generators. I think it is unethical for fee-charging firms to promote themselves in this way. For company websites to compound the confusion in consumers’ minds is shameful and the OFT is to be congratulated on clamping down on these rogue firms.”
If the company fails to comply with the OFT’s ruling it could face a £50,000 fine and lose its consumer credit license.
Consumers struggling with debt problems can contact a number of free services that provide debt management solutions like Payplan and the Consumer Credit Counselling Service (CCCS). The OFT published its debt management compliance review in September of last year which revealed that it had warned 129 paid-for debt management firms that they must improve their standards.
Una Farrell of the CCCS said: “This is a very positive development. Dealing with unmanageable debt is incredibly stressful. Trying to work out where to seek help only adds to this stress, so it is important that those offering advice clearly state what they are providing.
“It is particularly important that consumers are not misled into believing a service is free when it is not, or that they are dealing with a charity when they are not.”
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