OFT Issues Warning Over Debt Sale Scams

Thu, 25 Jun 2009

Consumers are being warned not to fall for adverts claiming to help them become debt-free by ’selling on’ their debts .

The Office of Fair Trading (OFT) said there has been "a significant increase" in the number of adverts online and in newspapers from companies claiming they can take over liability of people’s debts or write them off by purchasing the credit agreement .

But the watchdog warned that debts cannot legally be sold without a lender’s permission and that firms that suggest otherwise are misleading consumers.

According to the OFT, people taking up such an offer can be asked to pay administration fees of between 10 per cent and 20 per cent of the value of the debt, with minimum fees of between £800 and £1,000 often applying.

The group also pointed out that even if a borrower sells on their debt, they will still be liable for the original debt repayment and could therefore still be chased by debt collectors and bailiffs .

Although claims management companies are regulated by the Ministry of Justice, some firms offering such debt scams often do not have the necessary consumer credit licences and the OFT is working with local trading standards services to prosecute these companies.

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

"You cannot simply sell on your debt and its liabilities, and businesses that make misleading claims to the contrary are just trying to take advantage of consumers' distress."

"The OFT will not hesitate to take swift action against businesses which deliberately mislead consumers," he added.

Fiona Hoyle, spokesperson for the Finance and Leasing Association (FLA), commented: "The FLA has been working with the OFT and the Ministry of Justice to stop claims management companies making misleading claims, which often leave vulnerable consumers worse off."

"Anyone who has a debt problem should speak to their lender, or seek free debt advice from a charity such as CCCS, Citizens Advice or National Debtline ."
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