Debt Profiteers come under pressure

March 10th, 2009

It is a shameful fact that whenever there are people in trouble or distress there will be others willing to profit from that distress. As such, it is particularly gratifying to hear that the Office of Fair Trading (OFT) is taking action against more than a dozen businesses which set up bogus repayment plans for people struggling with debt.

The watchdog says these debt management companies are deliberately misleading consumers by using website addresses similar to non-profit organisations. In actual fact, they are commercial enterprises.

The regulator says it believes a substantial number of consumers could have been deliberately misled. It has written to 13 companies who run 27 websites and has told them to shut them down.

The regulator says if the firms do not comply, they could lose their consumer credit licences. If the companies are not licensed, as seems likely, they could face prosecution.

The director of credit at the OFT said in a statement that, “there is a danger that with increasing unemployment, more people could run into financial difficulty and we are concerned that at the point where they are most vulnerable and seeking advice, they are being deliberately misled by people who are trying to gain a commercial advantage from them.”

The belief is that these companies are misleading consumers by holding themselves out as free advice agencies such as Citizens Advice, the Consumer Credit Counselling Service, the Money Advice Trust and Advice UK.

The OFT have not named the 13 companies involved, but Citizens Advice has been worried for some time about debt management companies which use words that could give the impression they are connected with government organisations or the CAB.

The Citizens Advice Bureau has said that they are very pleased action is being taken to stop unscrupulous businesses profiteering from their activities.

As the UK debt mountain has grown, the number of businesses offering advice and solutions has increased rapidly.

There are now countless debt management companies advertising online which are perfectly legal as long as they have a consumer credit licence and adhere to the OFT’s debt management guidance. They are also well within their rights to charge for their services.

But charities like the Money Advice Trust say this should be made clear. It is warning consumers to do their homework before signing up for a debt management plan.

The Money Advice Trust says that ‘if people aren’t sure if the advice really is free and independent, they should look carefully at the website. An easy way is to look at the ‘About Us’ section to find out who funds it and who is behind it.’

The OFT is urging consumers to be vigilant when searching for debt advice online. If people have concerns, they can check out companies and websites on the OFT’s consumer credit register.

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They know no financial shame

March 1st, 2009

The ongoing and almost tortuously slow case brought by the Office of Fair Trading (OFT) against eight big UK banks edged another step towards resolution this week.

An appeal by the eight banks, against a High Court ruling that a regulator can investigate the fairness of overdraft charges, has been thrown out. The Appeal Court ruled that the Office of Fair Trading (OFT) has the power to investigate the issue of bank charges.

However, the banks are expected to ask the House of Lords for permission to appeal further, against the appeal judges’ advice.

While this happens tens of thousands of claims currently on hold in the English and Scottish legal systems will stay frozen.

In a statement the OFT said, “the court found that these terms are not part of the core or essential bargain between a consumer and their bank, and therefore consumers do have protection under the Unfair Terms in Consumer Contract Regulations (UTCCRs) for these terms.”

The presiding judge, Sir Anthony Clarke, dismissed the banks’ appeal and told them they should now allow the OFT to decide whether their charges were fair or not. He said four High Court judges had now come to the same conclusion on the issue of the OFT’s jurisdiction.

However, in a less than shocking response, the British Bankers’ Association (BBA) said its members still disputed the decision of the High Court and now the Appeal Court.

The Consumer Action Group (CAG) said the bank’s decision to appeal further was “amazing” and added, “they know no shame.”

The banks had argued last year, in both the High Court and the Appeal Court, that their overdraft charges and cash advance fees fell outside the scope of the 1999 Unfair Terms in Consumer Contracts regulations. The three Appeal Court judges rejected this view.

Bank charges campaigners were understandably delighted with the Appeal Court ruling. The consumers’ association Which?, said: “It is great to see the Court of Appeal being so unequivocal in their guidance to the banks that this is the end of the road.”

The litigation between the OFT and eight banks started in July 2007 and now looks likely to run into 2010. If the OFT ultimately wins the case, several billion pounds could potentially be refunded to millions of bank customers.

Since the test case started, tens of thousands of claims for the return of overdraft charges have been frozen in the English and Scottish legal systems, waiting for a final decision on whether bank overdraft charges are fair or not.

In 2007, when the campaign for the return of overdraft charges was threatening to swamp the court system, the UK’s banks were estimated to have repaid more than three quarters of a billion pounds to about 378,000 customers.

A further 65,000 claims are known to be on hold in the English county courts alone. All county courts have now been sent a letter to this effect, from the deputy head of Civil Justice in England & Wales, inviting local judges to continue the existing stays, until either the House of Lords or the OFT’s investigation come to a conclusion.

I can only echo the words of the CAG spokesman and marvel at the complete lack of shame and dignity displayed by the banks. Their behaviour when faced with the removal of one of their most lucrative scams reminds me of a young child when their favourite toy has been confiscated.

It seems that their scam has been rumbled. While they are fighting tooth and claw to save it I would bet good money that they are also planning their next money spinning wheeze.

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