Stricter OFT debt management guidelines welcomed

Debt Advice Foundation has welcomed the announcement of new, stricter debt management advice guidelines by the Office of Fair Trading. 

In addition to tougher enforcement action, the OFT has also set out examples of “unfair or improper practices” and has said it expects companies to refer clients to not-for-profit advice organisations if they need further help.

It has also disclosed that, following a review of the sector in 2010, some 87 businesses have left the market either voluntarily or as a result of enforcement action, and a further 67 warning letters were issued.

Examples of unfair practices include sending unsolicited texts, emails or voicemails; offering “inappropriate” incentives to staff to promote debt management products; and misleading customer by, for example, using websites that look like a charity or government body.

Debt Advice Foundation managing director David Rodger commented: “This is excellent news and brings us closer to having a robust, prescriptive, ethical framework within which all debt advisers can work.

"Ultimately we would like to see the actual delivery of advice a licensed activity where advisors are legally obliged to work to an agreed set of advice principles - there’s simply too much variance at present, right across the whole industry.

"It is fundamental that the initial signposting of solutions should be carried out appropriately and consistently. We would like to see our Ethical Debt Advice Charter be widely adopted throughout the debt advice industry so that instances of inappropriate advice can be reduced. 

"Our blueprint is based on an equitable tripartite agreement between the debtor, advisor and creditor, each of which has obligations they must meet in order for the debtor to gain access to the most appropriate solution for their circumstances.”

Debt Advice Foundation’s Ethical debt advice Charter is based on three fundamental principles:

  • The consumer has an obligation to make their best sustainable offer (to repay what they can afford to).
  • The debt advisor has an obligation to verify the facts and provide the most appropriate (and least drastic) advice based on those facts.
  • The creditor has an obligation to "treat their customers fairly" and (assuming that the debtor and the debt advisors have carried out their obligations) agree to the solution proposed.

The most appropriate solution should be based on the following key principles (in order of importance):

  • The advice will fully solve the person's debt problem
  • The Advisor will recommend the least drastic and most appropriate solution available
  • They will aim to achieve the above in the shortest time possible

For more information on the new OFT guidelines, see: http://www.oft.gov.uk/news-and-updates/press/2012/21-12