Debt: Bridget Prentice
warns claims management businesses about misleading marketing claims
MINISTRY OF JUSTICE
News Release (016/09) issued by COI News Distribution Service. 17
February 2009
Businesses that
mislead the public by claiming they can arrange for unpaid loans,
credit card debts or other consumer debts to be written off have
been told to stop or face action Justice Minister Bridget Prentice
said today, as new guidance was issued by the Ministry of Justice.
The guidance highlights misleading statements in adverts making
dubious claims or leaving out important information which might
breach consumer protection regulations.
Businesses making these statements could face enforcement action
by the Ministry of Justice which might ultimately result in
authorisations being removed.
Justice Minister Bridget Prentice said:
"Vulnerable people facing debt problems need help and
support. We have produced this guidance to protect innocent
customers from being misled by businesses advertising easy and
quick arrangements for outstanding loan, credit card and other
similar debts to be written off and compensation to be obtained.
"We would urge anyone who is considering using a business
offering such services to think carefully and seek independent
advice before making any final decisions.
"This guidance is also an important reminder to businesses
about the need to comply with rules on advertising and marketing
and provide an effective service to their customers."
Welcoming the new guidance, Ray Watson, OFT Director of Consumer
Credit, said:
"The OFT will not hesitate to take enforcement action
against licensed claims management businesses who engage in unfair
business practices by deliberately misleading vulnerable consumers
about the services they offer. Businesses should also be aware
that if they offer debt counselling or debt adjusting services
without holding an appropriate licence, they will be committing a
criminal offence and risk prosecution, and that any agreements
they enter into with consumers whilst unlicensed may be unenforceable."
The guidance is aimed at businesses offering claims management
services for unenforceable agreements. Claims management
businesses authorised by the Ministry of Justice have also been
warned that when advising about the payment of debts or on
rescheduling debts, they will need to be appropriately licensed
under the Consumer Credit Act 1974 by the Office of Fair Trading.
This action follows on from the Consumer Alert the Ministry of
Justice and the Office of Fair Trading issued in August 2008
urging consumers to seek independent advice before accepting the
services of businesses claiming that they can arrange for
outstanding balances under loan, credit card and other consumer
credit agreements to be written off and secure compensation.
Notes to Editors
1. Misleading Advertising Guidance: http://www.claimsregulation.gov.uk/userfiles/file/Unenforceable%20credit%20agreements%20marketing%20final%20guidance%2006%2001%2009%20(1).pdf
2. The Ministry for Justice (MoJ) is the Claims Management
Regulator in England and Wales. Ministry of Justice checks a wide
range of information about businesses before authorising them;
monitors the services the business provides; will take action
against businesses that breach the rules, which could include
suspension or cancellation of authorisation.
3. Authorised businesses have to follow strict conduct rules.
They must not 'cold call' in person, or engage in any
form of high pressure selling; give written information on how to
pursue a claim and the costs involved before a contract is agreed;
allow a 'cooling off' period of at least 14 days after
signing a contract in case the consumer changes their mind;
operate a customer complaints scheme that meets relevant criteria.
All the rules governing the conduct and behaviour of authorised
businesses can be found on the Claims Management Regulation
website. http://www.claimsregulation.gov.uk.
Enquiries about the regulation of claims businesses should be made to
Claims Management Regulation Monitoring and Compliance
Unit
57 - 60 High
Street
Burton-upon-Trent
Staffordshire
DE14 1JS
Telephone: 0845 450 6858 / 01283 233309
Fax: 0845 450 6866 /
01283 233335
Email: info@claimsregulation.gov.uk
http://www.claimsregulation.gov.uk
4. Statements that are considered to be misleading include:
"80% of credit agreements are unenforceable",
"50 million credit agreements are created every year, at
least 25 million are unenforceable",
"We are currently handling over 5,000 cases!",
"We are currently managing £30m of claims!",
"We'll get your credit cards written off within 6 weeks!"
"Fast results guaranteed!"
"We have a 100% success rate",
"A positive outcome is guaranteed".
5. The Consumer Credit Act 1974 (the Act) requires companies who
offer debt counselling/adjusting services to consumers to be
licensed by the OFT. Businesses who are authorised by the MoJ to
provide Claims Management Services will also need to be licensed
under the Act if they engage in any debt counselling/adjusting
activities, including the following:
* advising on how to restructure debts, how to alter debt
repayments or how to achieve early resettlement of debts
* contacting creditors and/or negotiating with creditors, on
behalf of the debtor, in order to make any of the above
arrangements (whether that contact amounts to
'negotiation' or not)
* providing a facility for the debtor to make a single repayment
which is then distributed on his behalf to his creditors
* consumers can check whether a business holds an appropriate
consumer credit licence by searching the OFT's online
consumer credit register at: http://www.oft.gov.uk/consumercreditregister
6. Following implementation of the new licensing provisions by
the Consumer Credit Act 2006 on 6 April 2008, a business applying
for debt related licence categories will need to submit a Credit
Competence Plan (CCP) as part of its application and should expect
to be subjected to an on-site visit as part of the assessment of
its competence to engage in this activity as the OFT considers
such credit activity to be high risk.
7. Licensed businesses can have specific requirements imposed on
them if the OFT is dissatisfied with any matter in connection with
the business. If such a requirement was not complied with, the
business concerned could be subject to a financial penalty of up
to £50,000. The OFT can also refuse or revoke a licence if it
decides that a trader is not fit to hold one.
8. The OFT published Debt Management Guidance for licensees in
December 2001. It applies to all those providing financial
management services including commercial debt advice where the
debts arise under consumer credit or consumer hire agreements. The
Guidance sets out minimum standards of behaviour expected of
licence holders engaging in the provision of debt management
services, which seek to provide advice and to re-schedule
customers' repayment of debt and charge for doing so. Key
principles of the Guidance are transparency, acting in the best
interests of the consumer and keeping the consumer informed. The
Guidance states that advertisements and other promotional material
must be accurate and clear and must not mislead, either expressly
or by implication or omission. The spirit as much as the letter of
the Guidance would apply to Claims Management Businesses where
their activities relate to advising and/or otherwise assisting
consumers with their debts.
9. The Citizens Advice service is a network of independent
charities that helps people resolve their money, legal and other
problems by providing information and advice and by influencing
policymakers. For more information in England and Wales see http://www.citizensadvice.org.uk
10. For more information, please contact Ministry of Justice
Press Office on 020 3334 3536.
ENDS
http://www.justice.gov.uk