Debt Management Guidance
The OFT released their latest debt management guidance in March giving DMCs more details on how they should operate. Particularly in focus in this latest edition was the use of SMS texting and other direct marketing, the use of misleading company names and the incentives on offer to staff for signing up clients to particular services.
Direct marketing for debt solutions has always featured highly on the OFTs concerns with cold calling in person being banned altogether. SMS texting in itself is not illegal, as long as the people receiving the text have opted-in, are given the option to opt out, and the company contact details are clearly displayed within the message, which itself must not contain misleading information. The problems that the OFT have highlighted are being caused by spam texters, who literally send millions of SMS text messages to sequential random numbers, therefore annoying many people who have not opted-in. There were similar concerns raised over the use of email marketing by some debt management companies.
Mis-leading company names formed a major part of the latest guidance because, according to the OFT, people were getting confused as to whether a company was fee-charging or a charity. This was especially problematic on the internet, with many companies calling themselves things such as helpline and claim line and also having things such as debt free and free advice in their names. The OFT pointed out that trading names should be clear, transparent and not imply that the advice was free if there was a vested interest by the fee-charging company. The look and feel of debt management websites should also not mislead consumers into assuming it is a charity or government website.
Financial incentives for staff offering particular products or services was also highlighted as an area of concern, since this could lead to consumers being given the wrong advice by an adviser thinking more about their own personal gain than the clients wellbeing. In the OFTs view, incentivising staff to offer a particular product or service based upon the money the company makes could lead to making a vulnerable persons problems being made even worse than it was before they sought help.
The debt management guidance was first published in 2001 in an attempt to help DMCs raise standards in the industry and provide better services for clients looking for debt help. In 2010, the OFT conducted a mystery shopping exercise and review of the industry, which lead to them issuing warnings to 129 companies. 87 businesses have since exited the industry and a further 67 warnings have been issued.
Direct marketing for debt solutions has always featured highly on the OFTs concerns with cold calling in person being banned altogether. SMS texting in itself is not illegal, as long as the people receiving the text have opted-in, are given the option to opt out, and the company contact details are clearly displayed within the message, which itself must not contain misleading information. The problems that the OFT have highlighted are being caused by spam texters, who literally send millions of SMS text messages to sequential random numbers, therefore annoying many people who have not opted-in. There were similar concerns raised over the use of email marketing by some debt management companies.
Mis-leading company names formed a major part of the latest guidance because, according to the OFT, people were getting confused as to whether a company was fee-charging or a charity. This was especially problematic on the internet, with many companies calling themselves things such as helpline and claim line and also having things such as debt free and free advice in their names. The OFT pointed out that trading names should be clear, transparent and not imply that the advice was free if there was a vested interest by the fee-charging company. The look and feel of debt management websites should also not mislead consumers into assuming it is a charity or government website.
Financial incentives for staff offering particular products or services was also highlighted as an area of concern, since this could lead to consumers being given the wrong advice by an adviser thinking more about their own personal gain than the clients wellbeing. In the OFTs view, incentivising staff to offer a particular product or service based upon the money the company makes could lead to making a vulnerable persons problems being made even worse than it was before they sought help.
The debt management guidance was first published in 2001 in an attempt to help DMCs raise standards in the industry and provide better services for clients looking for debt help. In 2010, the OFT conducted a mystery shopping exercise and review of the industry, which lead to them issuing warnings to 129 companies. 87 businesses have since exited the industry and a further 67 warnings have been issued.
