---

Office of Fair Trading

Answer

Since being given new powers in 2008, The Office of Fair Trading (OFT) has focused attention on the debt management industry. It has set up a dedicated team to investigate the debt management market, carried out a comprehensive review of compliance in the industry and taken significant enforcement actions targeting the worst companies and behaviours.The key findings to emerge from the debt management compliance review, which included onsite compliance visits by Trading Standards Officers, a website sweep and a mystery shopping exercise, were that:"misleading advertising is the most significant area of non-compliance, in particular failing to disclose a fee is retained by the business and misrepresenting debt management services as being free when they are not""frontline advisers working for debt management companies are lacking in competence and are providing poor advice based on inadequate information""there is low industry awareness of the Financial Ombudsman Service (FOS) rules for resolving consumer complaints."The OFT's compliance report set out a detailed action plan to improve standards across the industry, focusing on robust enforcement action against licensees that fail, or refuse, to change advertising and/or behaviour.The OFT published its compliance report in September 2010 and at the same time announced that it had warned 129 firms that they needed to submit evidence demonstrating compliance or face licensing action. As a follow up to this announcement, on 28 January 2011 the OFT confirmed that 35 debt firms had surrendered their licences, eight faced action to revoke their licences, seven were under further investigation and 79 had submitted evidence, which is now being reviewed.If action is taken against the additional seven companies and/or some of the 79 firms who submitted evidence are found to be non-compliant, the OFT will publicise the details of this enforcement action at the appropriate time.As well as taking action as a result of the compliance review, the OFT has also taken a number of other licensing actions in the debt management sector and has cracked down on look-a-like debt management websites posing as charity or official sites, misleading trading names, inappropriate cold calling (working with the Information Commissioners Office) and has refused to licence companies that cannot demonstrate sufficient competence or experience. Since April 2008, the OFT has taken 37 licensing actions, issued notices to 69 companies/ traders, sent 185 warning letters and 951 advisory letters.The OFT is also in the process of updating its Debt Management Guidance to take explicit account of new and emerging unfair business practices, and will work with the two main trade bodies, the Debt Managers Standards Association (DEMSA) and the Debt Resolution Forum (DRF) to support their initiatives to introduce higher standards in the industry.

Secondary information

Type

Written question

Reference

37548; 522 c829-30W

Session

2010-12

Subjects

Debts Advisory services Office of Fair Trading

Link

View this Written question on www.publications.parliament.uk