New dodgy debt clampdown for 2012

The Office of Fair Trading has announced a further clampdown on dodgy debt companies. The clampdown will curb unsolicited texts and emails as well as paying sales commission to staff.

If you’re struggling with too much debt, we’ve always said your best bet is to get free advice from charities such as the Consumer Credit Counselling Service (CCCS), Citizens Advice or National Debtline.

Sadly too many people use fee-charging debt management companies instead. These companies have been heavily criticised in the past.

Indeed, back in 2010, the Office of Fair Trading (OFT) censured 129 firms for serious failings which  included giving poor advice and misleading advertising.

Now the OFT has issued new guidance that highlights several ‘improper practices’ including these three:

•  Sending unsolicited marketing text messages, email or voicemails 

•  Providing inappropriate financial incentives to staff giving debt advice, which could encourage them to recommend the wrong product 

•  Making false or misleading claims regarding the status of the business, for example operating websites which look like the website of a charity or a government body 

Any firm that does any of the above risks losing its consumer credit licence, and that could be the end of that business.

I think most people will celebrate a reduction in spam texts and emails, but the thing that really shocks me is offering ‘inappropriate financial incentives to staff.’ That sounds suspiciously like commission which really is monstrous.

People who are struggling with debt are often in great distress and very vulnerable – they shouldn’t be on the wrong end of aggressive sales pitches. Especially when the sales pitches may be pushing products that are inappropriate for the customer’s needs.

Don’t get me wrong, I accept there are some reputable private debt management companies out there. If you pay them a fee, they’ll give you some solid, honest advice in return. And it’s possible that they’ll be able to give you advice more quickly than one of the debt charities.

That said, I’d still recommend one of the free charities every time. If you’ve got too much debt, the last thing you want to do is pay extra fees for something you could get for free. When it comes to debt, the best advice is free advice.

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