Beware phoney advice from Claims Management Companies

December 2009

The CSA and MoJ are trying to tackle websites guilty of encouraging debtors to evade debt

If you are already facing debt collection calls, letters and visits chasing for outstanding debts, you can't be blamed for looking for a way to get out of the problem. And the recent surge in Claims Management Companies (CMCs), offering ways to wipe out your debt might sound appealing. But the simple warning is if it looks too good to be true - it probably is!

Now, the Credit Services Association (CSA), the main trade body for debt collectors, is trying to tackle the many websites that are guilty of "encouraging" people to evade debts, provide "breeding grounds for misinformation". In particular, the CSA warns about online forums set up by Claims Management Companies that "celebrate 'victories' against creditors, set up tallies of how much has been refunded in bank charges and provide standard template letters".

These claims are often unfounded and just designed to entice the vulnerable into signing up to their services. But rather than solve your problems they could actually make them worse - because while you don't settle your debts, interest and charges will continue to accumulate and your credit file will look worse.

CMCs are licensed and authorised by the Ministry of Justice (MoJ) and growth has far exceeded original estimates, with approximately 951 in June 2007 and over 3,000 by May 2009. These companies require a Consumer Credit Licence if they provide debt advice and debt counselling. If you have been approached then you can check they are licensed by the MoJ and OFT by visiting:

• Ministry of Justice Business Search
• Office of Fair Trading Public Register

Kevin Still, Director of EuroDebt, commented: "We have seen a significant rise in the activities of these companies and would recommend that anyone approached visit the websites of the Ministry of Justice and the Office of Fair Trading to read the very strong warning that they are issuing about these companies, especially those claiming that they can write your debts off because your credit agreement is unenforceable. Many of the practices of these companies have been found to be highly detrimental to consumers. We encourage people with debt problems to seek professional money or debt advice."

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