Debt Management Companies Disguise As Charities

The Office of Fair Trading (OFT) has warned 129 debt management firms that they must to change the way they operate or face losing their license. The report highlighted the a number of problem areas including misleading advertising claims, poor visibility around the fees they were being levied and ‘recycling’ customers by way of multiple debt solutions to increase fees. The 11 month review revealed three quarters of firms within the sector charged fees at the start of their process, which would inevitably lead to the situation deteriorating further.

The review said “In some cases, it appears that business models may be set up to take the maximum amount of money from a consumer regardless of their circumstances” ... “Firms are not giving the advice or offering the solution that is in the best interests of the consumer, but instead that which is most profitable to them”. Understanding how and where a debt management company recovers its fees is essential before entering into a long-term agreement. It’s also important to speak to an advisor that will consider all of the options, not just those solutions that generate fees for the advisor.

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