Payday advance lending experts have recently reported that the Office of Fair Trading has recently come forward with new guidelines for credit repair service or debt management advice firms in order to protect consumer interests.
According to the Financial Ombudsman Service, complaints lodged against firms specialising in debt management services to customers who have fallen on hard times due to unmanageable interest rates on short term loans increased by a significant margin in 2011. Last year saw 546 complaints made to the FOS, while 2010 saw only 463 made in comparison.
Complaints made included concerns regarding firms charging high fees – cash that could have gone to repay short term loans or other unsecured debts – and the new guidelines published recently came down on such up-front fees. Other practices discouraged by the OFT guidance include spam emails or text messages, and unsolicited calls at home, while the watchdog also sought to discourage firms making misleading claims about the services they offer.
Some websites owned and operated by debt management firms are purposely designed to look like government or charity sites instead of the commercial sites that they are. However, under the new regulations, firms continuing to engage in this practice will risk the OFT revoking their licence.
Another practice that the OFT wishes to discourage is incentivising employees of debt management companies to give advice. The watchdog feels that allowing the practices to continue could result in customers being given inappropriate advice by employees motivated by personal financial gain instead of acting in the customer’s best interests.