Brokers told to beware dubious claims firms

29 June 2009

The OFT says a number of dubious claims and debt management firms are offering to resolve consumers' debt problems.

For an upfront fee, these firms are telling heavily indebted consumers that they can write off their debts by purchasing the original credit agreements on unsecured loans or credit cards.

But the offer is just a scam to con consumers. The OFT says the law does not allow the sale of debt without the lender's permission so businesses that suggest otherwise are making misleading claims.

Brokers who introduce clients to these companies would also be misleading consumers and be considered equally culpable.

Consumers who sell their debts to any of these businesses either directly or through brokers will remain liable for their repayments as well as losing the money they paid for the false service.

The primary regulator of claims management companies is the Ministry of Justice, but businesses that operate in the credit or debt sector also need to be licenced by the OFT.

Ray Watson, director of credit at the OFT, says: "With most scams when something looks too good to be true it usually is, and that is certainly the case here.

"We will not hesitate to take action against any companies that deliberately mislead consumers."

Carl Wright, managing director of Cartel Client Review, does not want to see all claims management firms tarred with the same brush.

He says: "The methods of these firms may seem att- ractive to some but their lack of legal experience with unenforceable credit agreements will only leave consumers in deeper financial trouble and could land them in court."

"It is imperative that the MoJ, the OFT and the Financial Services Authority step in to ensure these companies are investigated. If they are found to be in breach of the law they should be reprimanded accordingly."

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