This week, I was called by the Speaker at Prime Minister's Questions and I used this opportunity to call on David Cameron to regulate the Debt Management sector and ‘beef up’ the powers of the Office of Fair Trading (OFT) to deal with rogue companies.
Debt management is a lucrative business. Over the past decade, countless firms have sprung up – many using dubious tactics to acquire customers. Misleading advertising and a procession of inflated claims about how easy it is to write off your debts are just a few tactics some companies have been caught resorting to – and almost all of them charge high fees.
There is growing support in the country and within parliament for change and I am spearheading the campaign as the new chair of the All Party Group on Debt & Personal Finance.
In his reply, David Cameron acknowledged Ms Fovargue’s experience in this area and undertook to consider the issue.
The OFT’s recent review of the market revealed shocking results. When it conducted 168 compliance visits and mystery shopped 172 providers, 129 firms were told to take immediate action or risk losing their credit licence.
It is little wonder that one in four UK adults, according to research organisation Mintel’s September 2010 debt management report, think that debt management companies (DMCs) ‘prey on the desperate’ and ‘are just rip-off merchants’.
DMCs must hold a consumer credit licence issued by the Office of Fair Trading (OFT). As an unregulated industry, two trade bodies DEMSA and the Debt Resolution Forum are aiming to raise industry standards.
Nonetheless I remain unconvinced. Self-regulation has failed tens of thousands of people in this country and in the absence of a regulatory framework, many people are receiving poor and inappropriate advice with front loading of fees from many DMCs they contact for help.
The OFT has no power to stop a company trading while they investigate, which is on average two years and, ideally, the best solution is to expand free debt provision from agencies like CABs so people aren’t paying to get out of debt.