OFT warns consumers about 'debt sale' scams

23 June 2009

The OFT is warning consumers not to be taken in by businesses claiming to help them become debt free by 'buying' or 'selling on' their debts.

The warning follows a significant increase in the number of adverts on the internet and in newspapers from debt and claims management companies that misleadingly state they can take over liability for debts or write off debts by purchasing consumers' credit agreements.

In fact the law does not allow the sale of debt without the lender's permission and so businesses that suggest otherwise are making clearly misleading claims. Brokers who introduce clients to debt and claims management companies that say that they can 'buy' and 'sell on' consumer debts are also misleading consumers.

Consumers need to be aware that if they 'sell' their debts to one of these businesses, either directly or through a broker, they will still be liable for their original repayment obligations as well as losing the money they paid for this false service. Consumers will also still be subject to any debt collection activity and negative credit scoring associated with the original debt.

The principal regulator for claims management companies is the Ministry of Justice. Those businesses that operate in the credit/debt sector also need to be licensed by the OFT. Some of the firms offering these services do not have consumer credit licences and the OFT is working in partnership with local trading standards services to prosecute them for unlicensed trading. Formal licensing enforcement action has already been initiated against licensed companies whose advertising or websites are making these misleading claims.

Ray Watson, OFT Director of Credit, said:

'Like most scams, when something looks too good to be true, it usually is, and this is certainly the case here. You cannot simply sell on your debt and its liabilities, and businesses that make misleading claims to the contrary are just trying to take advantage of consumers' distress.'

'The OFT will not hesitate to take swift action against businesses which deliberately mislead consumers.'

Kevin Still. Director of EuroDebt, commented:

'We have seen an increase in the number of consumers and financial intermediaries who have been targeted by these companies. We would strongly recommend that any one in financial difficulty seek professional advice from a genuine debt advice provider. Dealing with your debts rather than avoiding them is going to be in your best interests. EuroDebt's clients have multiple credit agreements and it is important to provide a fair return to these creditors based upon what you can reasonably afford, that is the basis of a robust and sustainable debt solution like a Debt Management Plan or an IVA.'

The link to the full story can be found at the Office of Fair Trading website.

Responding to the OFT's warning on "debt sale" scams, Fiona Hoyle, Head of Consumer Finance at the Finance & Leasing Association, said:

"The FLA has been working with the OFT and the Ministry of Justice to stop Claims Management Companies making misleading claims, which often leave vulnerable consumers worse off. Unless the lender gives permission, a debt cannot be taken over by any other organisation."

• Share
• 
• 
• Store
• 
• Follow
•