Protect yourself from credit scams

March 4th, 2011

The always excellent Citizens Advice have claimed that Unscrupulous credit businesses are cashing in on people’s desperation for loans during tough economic times.

Fraudsters are making unsolicited offers to find loans for people before charging them hefty up-front fees. The loans often fail to materialise and victims are then charged a premium rate when calling to complain.

Citizens Advice has called on the fair trading regulator to intervene and it has submitted a super-complaint to the Office of Fair Trading (OFT). The regulator now has to give a response within 90 days.

If the OFT thinks there is a case to answer, then it can decide to launch a full investigation in its own right.

It is common knowledge that the current economic conditions provide “fertile ground” for rogue credit businesses, with many households facing financial difficulties.

The charity said it had spoken to people in England, Wales and Scotland who had been ripped off. They had received a text message or telephone call from a firm offering to find them an unsecured loan.

Those who accepted were then charged large up-front fees for little or no service in return.
Other victims were persuaded to hand over their bank details and later found that money had been taken from their account without their permission.

Victims struggled to complain, and found that, instead, they were being inundated by calls and text messages offering loans or debt management services from other firms.

A designated consumer group can make a super-complaint to the Office of Fair Trading (OFT) if an issue is “significantly harming the interests of consumers”. The OFT has 90 days to respond by stating what action, if any, it plans to take on the issue and the reasons behind its decision.

Citizens Advice wants the OFT to ban cold-calling by credit or debt management companies, as well as an end to these companies demanding up-front fees.

The framework of consumer protection about unsolicited marketing and up-front fees charged by credit brokers is not only complex, but loopholes give too much room for bad practice to flourish.

Analysts and debt charities believe that the Consumer Credit Act and data protection legislation need to be urgently updated to tackle these problems at root cause.

The Association of Business Recovery Professionals represents legitimate debt management companies, and called for the OFT to step up regulation of the industry.

The financial ombudsman service received 6,329 complaints about consumer credit in the last financial year, an increase of 110% on the previous year. Complaints have continued to grow since, although not all cases were found in the customers’ favour.

This is an extremely worrying development, although perhaps inevitable given the current climate. Whenever there are vulnerable people there will be others working to take advantage of them.

While charities and the Government work to identify the guilty and protect the vulnerable there is even greater need than ever for people to act sensibly when looking for credit or debt advice. As always in life, if something seems too good to be true then it is.

Posted in Personal Loans | No Comments »

Newer Entries »