Debt Management Firms Withholding Debtor Payments

An investigation by the BBC has revealed that some debt management companies are withholding debtor payments rather than passing them through to their creditors, which they are mandated to do as part of the industry’s compliance code, the Office Of Fair Trading’s Debt Management Guidance. It is understood that the companies are keeping back the payments in order to accrue a settlement figure to offer to the creditors at a later date. However, in doing so, the client runs the risk of losing their money altogether if the company is wound up before any offer is made.

An investigation by the BBC has revealed that some debt management companies are withholding debtor payments rather than passing them through to their creditors, which they are mandated to do as part of the industry’s compliance code, the Office Of Fair Trading’s Debt Management Guidance. It is understood that the companies are keeping back the payments in order to accrue a settlement figure to offer to the creditors at a later date. However, in doing so, the client runs the risk of losing their money altogether if the company is wound up before any offer is made.

The OFT’s director of consumer credit, David fisher commented “Where we have evidence we will remove a company's consumer credit licence, which means it cannot operate. We will also next month be issuing stronger rules for the entire sector, which explain what we expect of them.”

To read the full article click here.

Tweet