OFT Debt Management Guidelines |
As Licenced debt management advisors, we adhere to the guidelines
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© Crown copyright 2001
PART I
Introduction
1) The Office of FairTrading (OFT) issued general guidance to holders
of, and applicants for, consumer credit licences in February 2001. In so
doing, OFT indicated its aim to follow this by further guidance for
specific market sectors where problems have been identified or where a
more detailed consideration of particular market circumstances would be
helpful. This guidance, on debt management, is the first of the series
of sector-specific guidance.
Scope of the guidance
2) Advice to consumers (also referred to as ‘clients’) about debt
problems has for many years been provided free by Citizens Advice
Bureaux, independent money advisers, Consumer Credit Counselling
Service, National Debtline and others. Since the mid 1990s fee charging
debt management companies (‘DMCs’) have also entered the market. A
number of concerns about the conduct of some DMCs have been brought to
the attention of the OFT by consumers, consumer bodies, the credit
industry and others. For this reason guidance for this business sector
was identified as a priority.
3) The debt management services covered by this guidance consist of all
or any of the following when provided to debtors who are consumers
(i.e., those acting for purposes outside their business) or individuals
under consumer credit agreements:
advice on how to restructure debts, how to alter debt repayments or
how to achieve early resettlement of debts;
contacting creditors in order to make any of the above arrangements
(whether that contact amounts to ‘negotiation’ or not);
providing a facility for the debtor to make a single repayment which
is then distributed on his behalf to his creditors; and
reviews of the debtors’ financial circumstances and/or payments.
4) The guidance has been developed and written with DMCs in mind. But
the principles that underlie its content, e.g. the need for transparency
about the service that is being provided, keeping the consumer informed
and giving advice which is in the consumer’s best interests, apply
equally to those who provide advice for no direct charge. Where the
guidance is relevant to the ‘free’ sector, e.g. much of the material in
the section on ‘Advice’ it, therefore, also applies to that sector.
5) The Guidance is not primarily intended to cover credit repair
services or advice and assistance with individual voluntary arrangements
or personal bankruptcy. But the OFT will consider breaches of it
relevant to the fitness of those providing such services.
6) This publication also sets out views on some fitness issues that have
arisen in relation to the conduct of lenders, creditors and credit
brokers in their dealings with DMCs.
Purpose of the guidance
7) All who provide debt management services, whether they charge a fee
or not, are required to be licensed under the Consumer Credit Act 1974
(‘the Act’). Free provision of some debt management services is made by
a number of organisations, some of whom operate under individual
licences and some of whom operate under the group consumer credit
licence provisions of the Act. This Guidance is relevant to the
activities of all such providers but for the reason given above is aimed
primarily at DMCs.
8) The OFT has a duty under the Act to ensure that applicants for
licences are fit to engage in the activities for which they wish to be
licensed, and to monitor the continuing fitness of those to whom
licences have been granted. In considering fitness the OFT is able to
take account of any circumstances which appear to be relevant, and in
particular, any evidence that an applicant or licensee, or any of its
employees, agents or associates, has engaged in business practices
appearing to the OFT to be deceitful or oppressive or otherwise unfair
or improper (whether unlawful or not).
Where the OFT has evidence of such practices action can be taken to
refuse or revoke the consumer credit licence of those concerned. The
Office also has powers to take action, where appropriate, under other
legislation such as Control of Misleading Advertisements Regulations,
Unfair Terms in Consumer Contracts Regulations, the Consumer Protection
(Distance Selling) Regulations and the Stop Now Orders (EC Directive)
Regulations.
9) The OFT has no objection to DMCs charging for, or consumers choosing
to pay for, debt management services. The consumers using these services
will, however, often be vulnerable because of the nature of their
financial problems and, almost by definition, have the least available
financial resources.
It is, therefore, particularly important that the services provided by
DMCs are carried out with due care and attention.
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