Business

Debt management firms face renewed warning from OFT

Sterling notes and coins
Image caption Complaints about debt management companies include gripes about fees

Debt management companies have been given more details on how they must operate amid rising complaints about the sector.

Debt management companies charge a fee for advice on how to deal with running into the red.

The Office of Fair Trading (OFT) has extended its warning on how these companies should avoid sending unsolicited text messages or e-mails.

Yet the Financial Ombudsman Service saw a 18% rise in complaints in 2011.

There were 546 complaints made to the service about debt management companies last year, compared with 463 the previous year. The ombudsman found in favour of the consumer in more than half of these cases.

Complaints included firms taking money from customers, but not passing this on to the people who are owed. Another gripe was when people in debt spent a sizeable proportion of payments on fees, rather than on clearing debts.

Advice to the industry from the OFT includes a requirement to ensure that debt management products are suitable for customers' specific issues.

The OFT also said it would take action against companies that made misleading or false claims, such as operating websites that made the firms appear to be the same as advice charities or a government body.

Those in debt should sometimes also be referred to not-for-profit advice organisations for assistance.

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