Office of Fair Trading
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OFT announces review of debt management practices

The OFT has today launched a review of compliance levels across the debt management industry.

The aim of the compliance review is to gain a deeper insight into the evolving practices of debt management firms. The review will inform any subsequent revision of the OFT's debt management guidance and could lead to the OFT taking formal action to stop any identified consumer harm.

The review will include a sweep of online debt management advertising, an online form for consumers wishing to complain about a licensee and a questionnaire to licensees involved in debt management.

Since the OFT's last compliance review in November 2003 the debt management market has changed significantly. The sector has become increasingly complex with a rapid increase in new entrants and a diverse range of business models, including a rise in internet-based advertising. This comes as more and more consumers seek help for debt problems.

The OFT has already taken action against non-compliant traders in the market. Since April 2008 the OFT has undertaken 24 formal actions to either obtain undertakings, impose requirements, or refuse or revoke credit licences held by debt management businesses. The OFT has also warned the industry over misleading IVA mailings, 'look alike websites' and cold-calling.

Proactively tackling problems in the debt management sector is a high priority for the OFT as there is significant risk that consumers who suffer from distressed debt could end up in a worse, rather than better, financial position. Misleading advertising and poor quality debt advice can result in consumers being sold costly debt remedies that are inappropriate to their needs.

Ray Watson, OFT Director of Consumer Credit, says:

'A recent increase in formal OFT enforcement action, rising complaints and new problems emerging in the market suggest that some businesses are still not meeting minimum standards. This review will help us identify those practices that are harming consumers, as well as the reasons for non-compliance, and will help us target our enforcement action.'

A report on this review will be published in 2010.


1. Traders who wish to operate in the debt management sector must hold an appropriate consumer credit licence. The consumer credit licensing regime was set up by the Consumer Credit Act 1974 (the Act) to protect the interests of consumers. The OFT has a duty under section 25 of the Act to ensure that only those who are fit and competent are given and retain a licence. Section 25 of the Act confers an ongoing duty on OFT to monitor licensees' fitness throughout the life of the licence, hence the launch of the compliance review.

2. The OFT issued debt management guidance (the guidance) in December 2001 (updated September 2008 to reflect the reforms introduced by the Consumer Credit Act 2006). The guidance sets out minimum standards for debt management businesses that provide debt advice (including free to client) and/or seek to re-schedule customers' repayment of debt and charge for doing so. Key principles relate to the transparency of advertising and promotion of a debt management businesses' services, fees charged to consumers, acting in the best interests of the consumer and keeping the consumer informed. Applicants and licence holders are expected to abide by the guidance.

3. The compliance review will consist of:

  • An online questionnaire to licensees involved in debt management, including free to client and fee charging debt management businesses, creditors, trade bodies, consumer advice bodies and trading standards services. For more information, see the Debt Management Compliance Review 2009 section.
  • Comment sought from interested parties on compliance with the guidance and how it is used in practice.
  • An online form for consumers wishing to complain against a licence holder or applicant.
  • A sweep of online debt management advertising.

4. According to the Money Advice Trust's (MAT) 2009 report there are approximately 150 debt management businesses, of which 34 are members of the Debt Resolution Forum (DRF) and seven are members of DEMSA. DEMSA's code of practice was approved by the OFT in 2008 under the Codes Approval Scheme.
5. The OFT has undertaken 24 formal actions to either obtain undertakings, impose requirements refuse or revoke credit licences held by debt management businesses since April 2008. We have also undertaken a number of market facing interventions since 2007 aimed at enforcing compliance with our guidance. These include tackling:

  • misleading IVA advertising in newspapers and on websites
  • misleading IVA promotional materials sent directly to over-indebted consumers
  • websites purporting to be charitable or government organisations to mislead consumers, and
  • misleading or unlawful cold calling by telephone.

6. Consumers considering using debt management services should contact for information about free advice.

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