CMCs slammed by bank report

16/10/2009

A study from the British Bankers' Association (BBA) has criticised the practices of some UK claims management Companies (CMCs).

The research, carried out on behalf of the group by GfK NOP, found that firms are attempting to generate business by promising customers that they can have all their debts wiped out.

BBA pointed out that there was "no evidence" that they can actually provide this service.

Commonly, CMCs tell customers that there are legal loopholes in the Consumer Credit Act that render their initial card and loan agreements unenforceable.

Many then ask for up-front fees to help customers fight their cases in court, with no guarantee of eventual success.

BBA's study also showed that people do not need any qualifications to become a claims handler.

Commenting on the BBA study, EuroDebt director Kevin Still said: "EuroDebt has been very vocal in alerting consumers to propositions that may cause them serious detriment. Taking professional advice on debt problems is essential if you are unable to meet contractual commitments now or in the near future. Many households will be facing this challenge in 2010 where disposable income continues to be squeezed. It is our experience that facing up to your debts is much better than remaining in denial."

He added: "We see many clients that have been approached by CMCs and who have paid upfront fees for their credit agreements to be reviewed to determine if they are unenforceable. In many instances the lender has pursued collection activity and reported missed payments to the credit reference agencies when the consumer stops making payments against the agreement 'being reviewed'. In contrast, managed debt solutions like a Debt Management Plan or an IVA are genuine and proven methods of dealing with debt, where lenders and collectors recognise that you have taken a responsible action to your finances without borrowing further."

Tags; Income Worries and Debt, Credit Card Lifestyle,

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