The guidance expands on previous versions, providing examples of 'unfair or improper practices' which, if engaged in, could render a business unfit to hold a consumer credit licence and operate in the market.
Examples of unfair practices include:
- Sending unsolicited marketing text messages, email or voicemails.
- Providing inappropriate financial incentives to staff giving debt advice, which may encourage them to promote unsuitable debt management products for personal gain.
- Making false or misleading claims regarding the status of the business, for example operating websites which look like the website of a charity or a government body.
An overall theme of the guidance is for businesses to be transparent so that consumers have all the information necessary to make informed decisions about the most appropriate debt solutions for them given their financial circumstances.
The guidance builds on enforcement action taken following a compliance review of the sector in 2010, which identified widespread concerns, including problems with advertising and marketing practices and the quality of advice given.
Following the compliance review, the OFT issued 129 warnings to debt management businesses. Since then, 87 businesses have exited the market, either voluntarily or as a result of enforcement action, and a further 67 warning letters have been issued.
David Fisher, director of the OFT's Consumer Credit Group, said: “This new guidance clearly sets out the standards we expect from debt management businesses.
“All too often it may be particularly vulnerable consumers who fall victim to poor quality debt advice and we will continue to take action against businesses that fail to follow our guidance.”
