I was interested to read on Mortgage Strategy Online that 35 debt management firms have surrendered their consumer credit licences and at least 15 are facing licensing action as a result of an Office of Fair Trading compliance review (’35 debt management firms surrender licences in OFT review’, Mortgage Strategy Online, January 28).
Money Advice Trust’s chief executive, Joanna Elson, argued that it is further evidence that the fee-charging debt management industry is not fit for purpose.
But I think her comments need to be put into context.
Of the 50 firms she says failed to meet the requirements, a substantial majority – 35 – surrendered their licences.
We understand these were largely small firms that were doing little or no debt management, so saw no need for a licence.
The Debt Resolution Forum welcomes the OFT’s decision to revoke eight firms’ licences and to investigate seven more.
Far more significant is that the 79 companies that did respond to the OFT’s requirement for an independent, professional audit of their compliance with the OFT’s debt management guidance have done so.
This is in keeping with the fee-charging debt resolution industry’s determination to work with the OFT to create an industry that consumers and creditors can trust.
Poor practice has been rife in the past, but Elson’s remarks that our industry is not in a fit state to meet the charitable sector’s need for debt advice is inaccurate.
The OFT’s review of its guidance took place in autumn 2009 and spring 2010, and by the time it issued its request for audits in September 2010 most firms had acted on the points raised at inspection.
DRF has introduced an advanced BTEC for members’ staff, an independent complaints panel and independent, annual compliance monitoring by the Insolvency Practitioners’ Association. It is also working with the OFT to create a professional trade association.
Much of the change that is required to create this trusted industry has taken place – and the results will be seen soon.
Elson’s comments that “people turn to fee-charging debt management companies from a position of forced ignorance” and “charities don’t have the advertising budgets of fee-chargers” are also inaccurate.
Compliant fee-charging debt management firms must, and do, highlight all free sources in their advice calls and on their websites. In fact, their advertising budgets have shrunk. Meanwhile, the free sector benefits from frequent mentions by the media, so the playing field is now sloping in its favour.
The fee-charging debt resolution industry is responding to the challenge of creating and keeping public trust. In these difficult times it will have more of a role to play, especially as recognition grows that those who benefit from debt advice can sometimes afford to pay for it. The charitable sector is a necessary safety net for those who can’t.
Chairman, Debt Resolution Forum