In a recent report by the BBC, the true extent of the foul practices of two recently closed debt management firms has come to light.
In a bid to highlight the extremity of the firms’ crimes, the BBC portrayed the experiences of a couple who fell victim to Global Debt Solutions’ malpractice.The Murphy couple told the BBC that after fearing that mounting debt could lead to their house being repossessed, they accepted Global Solutions’ offer to arrange a repayment plan for £40,000 of credit card debt and loans. The Murphy’s later learned though that their creditors were not being repaid and had taken legal action against the couple. Global Solutions, later known as 3 Step Finance, have now been shut down by the Insolvency Service, who found the company had failed to monitor payments effectively. Since this closure, which took place last June, the industry has also seen Apex Debt Counselling & Management, which held back clients’ money after going out of business, forced into closure. Alasdair Warwood, Secretary General of the Association of Professional Debt Solution Intermediaries (APDSI), said: “The spate of collapses of debt management companies over the last year has demonstrated that there have been significant breaches of the OFT's Debt Management Guidance (OFT366) - specifically the requirement to ring fence client funds and the requirement to disburse client funds within five working days of receipt of cleared funds. Both customers and intermediaries - who may themselves be at risk if they introduce clients to non-compliant DMCs - are entitled to expect that licensed DMCs are complying fully with OFT366.”As it currently stands, the funds of debt management firms’ clients are likely to be lost completely if the firm is closed down and the funds are not in protected accounts. The OFT has ‘promised’ to crackdown on non compliant firms, but one year since Global Solutions ceased trading many industry professionals feel that the situation is little improved. Alasdair Warwood added: “With the publication of revised Debt Management Guidance due to go out to consultation this June, APDSI will be urging the OFT to take pro-active steps to ensure that these aspects of their guidance are being complied with. APDSi, for its part, will need to be satisfied, and will be urging its members to satisfy themselves that any DMC that applies for membership or any DMC they deal with meets these requirements of the Guidance. “Consumers should also satisfy themselves that any DMC they deal with meets these requirements whether by being members of a trade association such as DEMSA with OFT code approval or by seeking direct confirmation from their DMC."The voice being projected from well-established and fully compliant debt management firms is also one that is firmly in favour of change. Kevin Still, Director of DEMSA member Atlantic Financial Services, said: “Whilst the commentary regarding to Global Debt Solutions (also known as 3 Step Finance) dates back to June 2010, the message remains clear that consumers need confidence in the debt solution providers they choose and being a member of a trade association like DEMSA is one way for firms such as ours to offer this peace of mind. “Members of the Debt Managers Standards Association (DEMSA) have signed up to a code that promotes consumers’ interests beyond the basic requirements of the law. Companies like Atlantic that display the DEMSA/OFT Approved code logo will offer you reliable customer service, which includes the use of a client account to protect funds. These funds will be promptly disbursed to creditors and the client will receive a monthly statement showing how their creditors have been paid in accordance with the OFT Debt Management Guidance. We welcome the clarification that the OFT have confirmed that they will be providing in June regarding the guidance, that are due to be consulted on for a period of 3 months.”Manchester debt firm is liquidated owing creditors over £2.2m
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