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This blog has been following the efforts of the Government to combat a swift rise in the number of companies using misleading advertising to convince customers they can have their debts quickly and easily written off.

Figures released in the last week show that one hundred companies offering to write off debts or secure personal injury compensation have been shut down by the Ministry of Justice (MoJ) since April 2007.

A MoJ spokesman said that the companies had been guilty of making misleading claims and using high-pressure sales tactics to get people to pay huge fees.

Although debtors are consistently warned about offers that seem too good to be true, the MoJ is worried that people desperate for a way out of their financial troubles can be vulnerable.

The BBC investigated and found that many claims management firms target people who owe large sums to credit card or loan companies. With the industry growing quickly it is becoming increasingly difficult to police.

The MoJ said some of the firms shut down had been using misleading advertising, claiming credit card debt could be written off within six weeks or that 80% of credit agreements were unenforceable.

In other cases, companies ignored requests for information from the government’s claims regulator or were run by people who had convictions for fraud, which is illegal in the UK.

The rule state that firms must not cold-call potential customers in person and must allow a cooling off period of at least 14 days for anyone considering taking up an agreement.

Yet despite these rules, companies were found to be forcing already debt-ridden customers to pay large up-front fees only for the service to later fall through.

The MoJ has been quick to point out that most claims management companies operate within the rules. However, some companies choose to flout those rules and some also target consumers who find themselves in debt. This is in complete contrast to other companies in the financial sector who appear to act much more ethically, for instance life insurance and stockbrokers.

Claims companies must give customers accurate information about the realistic chances of success and the costs involved in taking up their services. They must also not pressurise anyone into making on-the-spot decisions or handing over money without properly considering the facts.

As ever when this subject is discussed I will conclude by saying that no matter what an advert claims or how pushy a salesman is, the following mantra will always be true. If it looks to be too good to be true then it is. End of story.

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New calls have emerged this week for regulation of the activities of door-step lenders from an unexpected source. The children’s charity Barnardo’s says new regulation is needed to curb “extortionate” interest rates and prevent firms deliberately targeting poor and vulnerable families.

The charity’s new ‘Counting on Credit’ report cites Provident Financial, the UK’s biggest doorstep lender, claiming it charges interest of up to 545% APR.

Provident Financial has published figures this week which show that the number of borrowers using its service has risen this year. Loan companies have generally become more popular during the last few years as people have increasingly struggled to get credit from banks or building societies.

However, Barnardo’s says taking out such payday loans often plunges families into worrying levels of debt. The charity says ‘extortionate interest rates are typical of many doorstep lenders which will continue to flourish unless the government steps in’.

While nobody is claiming that loan companies are breaking the law, it is becoming ever more clear that they are deliberately targeting “desperate” people.

The cycle which has emerged over the past year and a half is that parents can’t afford the basic necessities for their children, so are forced to borrow. But banks don’t want their custom so they are turned away and excluded from access to everyday overdrafts and loans with reasonable interest rates. They are then left with no choice but to take what they can get.

The main defence of loan companies is that APR is considered to be a poor measure of short term, small sum credit and is not well suited to describing their loans. There is a degree of truth in this but it is a small one, and is negated entirely by unscrupulous business practises such as targeting desperate families with little chance of paying the loan back on time.

The Government is sure to look kindly on the proposals for regulating door-step lending companies but they are unlikely to achieve anything on the issue in the months left to them before the election. For the time being potential borrowers should avoid easy credit because, like so many things in life, if it looks too good to be true then it is.