Debt management companies (DMCs) will this week have received a questionnaire from the OFT as part of its ongoing investigation into the Citizens Advice super-complaint regarding the marketing practices and fee charging of credit brokers and other service providers, including DMCs. The complaint submitted to the OFT includes suggestions of new regulations to protect consumers, but this could do more harm than good to the compliant companies providing valuable debt solutions.
Strict legislation and restrictions are of course already in place, and the majority of DMCs are compliant and strongly support the OFT in its action against rogue companies to help build consumer confidence. To enhance the existing legislation monitoring and enforcement could be strengthened to help identify non-compliant parties as early as possible in the credit brokerage, debt solutions and claims management sectors.
Vance Parsons, Director of EuroDebt Financial Services said: "In their super-complaint, Citizens Advice has suggested a number of regulatory reforms that could be made in the credit market. We feel there are sufficient regulations and advertising standards in place and that it is more a matter of the regulators using their existing powers to take action against non-compliant businesses, of which we are of course fully supportive.
“It is important that compliant debt solution intermediaries and providers are not penalised for using legitimate marketing techniques that fall within the various advertising standards, some of which only came into force in March 2011. Clearly the worrying trend of unauthorised deductions from consumer bank accounts or credit cards, for which little or no service is provided in return, need to be dealt with as quickly as possible."
Alasdair Warwood at APDSI said: "When APDSI was established as a trade association for debt solution intermediaries in late 2010, one of our primary objectives was to look at existing marketing practices and help educate compliant and licensed businesses, typically IFAs and credit brokers, with regard to assisting people who have been identified to be in financial difficulty.
“With restrictions on credit through the recession it is inevitable that many brokers are finding more and more clients that don't meet lending criteria, but who require a debt solution where a debt consolidation loan or re-mortgage may not be viable or in the client's best interests. Many brokers will have marketing databases where current and former clients are facing multiple interest rate rises in 2011 and a continued erosion of disposable income."
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