The warning concerns companies claiming they can get debts written off and win compensation by challenging credit card and loan companies over whether some credit agreements can legally be enforced. A rash of such advertising has recently appeared in newspapers, on local radio and on the internet.
Misleading claims wrongly suggest that the vast majority of credit agreements are unenforceable that credit card debt can be written off within a few weeks, that a positive outcome is guaranteed, and that the company can write off all outstanding debts, get all previous payments returned, and allow people to keep any goods purchased. Some advertising suggests wrongly that it costs nothing to make a claim.
Firms typically charge around £500 up front to check one credit agreement, with no guarantee that they will be able to make a successful challenge. Where people have several debts, the fees can quickly mount up to several thousands of pounds and people may then be sold a 'no win, no fee' agreement to take legal action that can cost them even more.
Cases reported by Citizens Advice Bureaux include that of a couple paying off debts of around £20,000 on terms negotiated by a free debt advice service. Having seen the claims made in one advertisement, they were on the verge of handing over £1275 to get all their debts checked.
The CAB explained they could do this for free, and in fact only one minor debt was likely to be unenforceable. The CAB commented that if the clients had acted on the advertisement they would still have to pay their debts but would have spent £1275 for the privilege of being told this.
Citizens Advice Head of Consumer Policy Sue Edwards said: "These ads appear to offer an easy way out to people who have credit debts they are struggling to pay. But many credit agreements do meet the legal requirements and therefore can't easily be challenged as unenforceable. A CAB adviser can check for free if there may be genuine grounds for a challenge.
"We would urge people in debt to think very carefully indeed before spending money they are unlikely to get back and can ill afford on a 'solution' that in many cases will just make their debt problems worse.
Usually if something looks too good to be true that's because it is.
"We know from experience that most people want to pay back their debts but may turn to what seems like an instant solution out of desperation. The CAB provides free, confidential, independent and expert advice that can help people get debt free and stay that way."
The words of caution come on the same day Justice Minister Bridget Prentice has warned businesses making such claims to stop or face action, and during Scams Awareness Month, run by the Office of Fair Trading to alert people to common scams costing the British public a total of £3.5 billion a year.
