Claims companies warned on misleading advertising

Claims management firms that mislead consumers by claiming they can arrange for debts to be written off have been warned that they face enforcement action by the Ministry of Justice. Justice minister Bridget Prentice delivered the warning as the MoJ issued new guidance on misleading advertising which sets out minimum standards of behaviour for firms licensed to provide debt management services.

‘Vulnerable people facing debt problems need help and support,’ said Prentice. ‘We have produced this guidance to protect innocent customers from being misled by businesses advertising easy and quick arrangements for outstanding loan, credit card and other similar debts to be written off and compensation to be obtained.’

She added: ‘We would urge anyone who is considering using a business offering such services to think carefully and seek independent advice before making any final decisions.’

As the claims management regulator for England and Wales, the MoJ has the power to cancel the authorisation of businesses that break its conduct rules. The Office of Fair Trading licenses companies that offer debt counselling and debt-adjusting services under the Consumer Credit Act 1974.

Welcoming the new guidance, Ray Watson, the OFT’s director of consumer credit, said: ‘The OFT will not hesitate to take enforcement action against licensed claims management businesses who engage in unfair business practices by deliberately misleading vulnerable consumers about the services they offer. Businesses should also be aware that if they offer debt counselling or debt adjusting services without holding an appropriate licence, they will be committing a criminal offence and risk prosecution, and that any agreements they enter into with consumers while unlicensed may be unenforceable.'

The new guidance, Marketing and Advertising Claims Management Services: Unenforceable Credit Agreements, is available on the MoJ website at www.justice.gov.uk.