Have you used Money Advice Direct Limited?

Take_care_with_debt_managers_image

On 22 February 2011 the Office of Fair Trading (OFT) told us it has imposed requirements on Money Advice Direct Limited (MADL) to address concerns about misleading advertising by the business.

Money Advice Direct Limited is an OFT licensed lead generation firm that operates by introducing people to debt management plan and Individual Voluntary Arrangement (IVA) providers via its website.

The OFT was concerned about false statements and misleading content on the company’s website. It is the OFT’s view that this content encouraged consumers to believe that MADL was a not for profit organisation providing debt management solutions, rather than a commercial business acting as a lead generation company that passes contact details to debt management companies in exchange for a fee.

The requirements imposed on MADL set out that its advertising content across all media types, including its website, must:

  • make it very clear to consumers that the company does not provide or administer debt solutions
  • provide consumers with adequate information about the service being offered
  • not imply that the service is impartial or independent
  • make its commercial status clear and not give the impression through any of its advertising that it is a charity or a publicly funded body, and
  • ensure advertising of its debt management services is consistent with the standards set out in the OFT’s Debt Management Guidance.

MADL must also ensure that its compliance with the requirements above is independently audited and that evidence of this is sent to the OFT.

Separately, the OFT is also taking action to seek to compulsorily vary the company’s existing trading name ‘The UK Insolvency Helpline’ and to refuse its application to add the trading names ‘www.ivahelpline.co.uk’ and ‘www.insolvencyhelpline.co.uk’ to its licence. This action is subject to final determination by an OFT Adjudicator.

The OFT’s Director of Consumer Credit, Ray Watson, said:

‘It is important that consumers seeking help for debt problems know who they are dealing with and whether the company is providing an actual service or is simply a lead generator. We would advise anyone in financial difficulty to seek free debt advice or check whether the company they are in touch with is a member of the Debt Management Standards Association (DEMSA), which has an OFT accredited code.’

The technical notes provided by the OFT:

  1. Download Money Advice Direct Limited’s requirements (pdf 47kb).
  2. Under the Consumer Credit Act 1974, where the OFT is dissatisfied with any matter in connection with a business, a proposal to carry on a business or any other conduct by a licensee, associate or former associate, the OFT may impose ‘requirements’ on the licensee. Requirements may require a business to do or not to do (or to cease doing) anything specified for the purposes connected with addressing the OFT’s dissatisfaction, or securing that matters of the same or a similar kind do not arise.
  3. The action noted above in relation to the company name will be determined subject to any representations made to an OFT adjudicator.
  4. The OFT expects all those who provide debt advice and/or management services to adhere to the minimum standards, particularly those relating to advertising, outlined in its debt management guidance (the Guidance) published in 2001 (updated September 2008).
  5. In September 2010, the OFT published its debt management compliance review findings and announced that it had warned 129 businesses that they must improve standards. The OFT announced in January 2011 that 35 firms had surrendered their licence and that at least 15 were facing licensing action as a result of the compliance review.
  6. A breach of a requirement can lead to a fine of up to £50,000 and/or be grounds for revocation of a consumer credit licence.

The first three points from the Review’s executive summary show how important it is to get the right advice:

“1.1 The market for debt management services is large and growing, with the total cost to consumers in fees paid for debt management services expected to hit the £250 million mark by the end of 2010. It has the potential to play an important role in helping consumers, many of whom are very vulnerable, deal with complex and harmful financial problems.

1.2 Consumers in difficulty often seek immediate debt advice in desperation. As well as commercial debt management firms, a number of government and charitable organisations provide free debt advice and solutions. Regardless of what type of advisor a consumer turns to it is important that they receive the advice and solution most suitable to their particular circumstances. However the potential for large amounts of profit to be generated by the commercial sector creates a risk of abuse.

1.3 The choices that consumers make to tackle their debt problems can have serious  consequences both in terms of immediate financial cost, and long-term knock-on consequences on availability and cost of future credit. Furthermore, when problems do arise, for example where consumers are mis-sold an IVA or a debt management plan, there can be a significant long term financial and stressful impact which is difficult to resolve.

The full review entitled “Debt management guidance compliance review September 2010” is available by clicking here.