The OFT has today published its revised debt management guidance detailing the standards it expects from businesses.
The guidance is the latest step in the regulator’s attempt to crackdown on those firms in the sector it believes are not meeting compliance standards.
Expanding on previous versions of the DMG, it provides examples of unfair practices which could render a business unfit to hold a consumer credit licence.
Examples of unfair practice include:
- Sending unsolicited marketing text messages, email or voicemails.
- Providing inappropriate financial incentives to staff giving debt advice, which may encourage them to promote unsuitable debt management products for personal gain.
- Making false or misleading claims regarding the status of the business, for example operating websites which look like the website of a charity or a government body.
David Fisher, Director of the OFT's Consumer Credit Group, said: “This new guidance clearly sets out the standards we expect from debt management businesses. All too often it may be particularly vulnerable consumers who fall victim to poor quality debt advice and we will continue to take action against businesses that fail to follow our guidance.”
Commenting on the new guidance, David Mond, DRF chairman and CEO of debt solutions company ClearDebt, said: "We welcome this new guidance, which formalises current good practice and provides clearer and more specific guidance for debt management companies. This guidance is automatically part of DRF’s own mandatory members' code of standards – which exceeds that required by OFT.
"We believe that reputable debt resolution companies already meet and exceed these standards and DRF has robust annual inspection by the independent Insolvency Practitioners Association, in place to ensure consumers and creditors can have confidence in our members.
"DRF also applauds the recent change in OFT's procedures for examining new applications and renewals of Consumer Credit Licences. This is no longer a rubber-stamping exercise, but means that those individuals and companies that succeed in obtaining or keeping a licence will have jumped through many more hoops than before, including a much more rigorous examination of their business model, sources of leads and processes, as well as ensuring the people in the business have the right experience, skills and training. DRF has made a huge contribution to the latter, with the introduction of the 210 hour study Certificate in Debt resolution, now awarded to, or being studied for, by over 600 individuals.”
The guidance sets out its stance that businesses are also expected to refer consumers to not-for-profit advice organisations for further help, in certain circumstances, and to have effective measures in place to identify and deal with particularly vulnerable clients, such as those with mental capacity issues.
An overall theme of the guidance is for businesses to be transparent so that consumers have all the information necessary to make informed decisions about the most appropriate debt solutions for them given their financial circumstances.
David Mond added, "DRF welcomes OFT's emphasis on dealing appropriately with vulnerable people and has already piloted course in conjunction with mental health charity, MIND, to ensure DRF members' staff can identify vulnerabilities and advise appropriately.
"DRF believes that a mixed economy for debt advice is essential in the UK, where charitable debt advisors are being required to concentrate on the most vulnerable individuals and to advise around 50% more cases in 2012-13 with the same funding as last year.
"There are hundreds of thousands of people who need debt advice and can afford the fees our members charge – the cost of financial failure need not fall on the public purse. The OFT's guidance, and the work of trade associations like DRF will ensure consumers can go to a fee-charging debt resolution company in confidence that they will not be misled or their money mishandled."
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