OFT may shut down many debt management companies

Many debt management companies across the country are in danger of losing their licenses if they don’t soon comply with OFT guidelines.  Around 129 companies have just three months to prove that they are addressing and resolving problems.  This news became available through a recently released report from the Office of Fair Trading.

One of the largest issues is false advertising.  It appears that many of the companies in question are promoting or implying that they offer services for free when they do not.  Another problem is that counsellors seem poorly trained and do not understand the Financial Ombudsman Service regulations regarding complaints from consumers.

Debt management companies negotiate IVAs, creditor reconciliation agreements, and debt management plans.  Consumers seek out these agencies when they are in financial trouble.  It is despairing to think that they are putting themselves and their finances in the hands of companies that are either unscrupulous or incompetent.

The names of the companies under rebuke cannot be disclosed.  Disclosure cannot come until after their license has been revoked or refused.  With this many companies involved, the problem appears to be systemic.

It is thought that if the main trade organizations for these companies were to introduce auditing and compliance systems for their members it could prove very helpful.  To date, no move in this direction has been announced.

It seems a predicament for the consumer since as of now they have no way of knowing if the company from which they are seeking aid is in danger of losing its license or not.