Misleading debt firms closed down

A spokesman for the MoJ said they had been guilty of making misleading claims and using high-pressure sales tactics in order to get people to pay over-the top fees. He said that people desperate for a way out of their financial troubles could be vulnerable.

Consumers were warned against offers that seemed too good to be true, as they often were, and some people have found themselves in more debt than they started with after answering adverts by these firms to ´clear your debt.´
A BBC spokesman said that many debt help firms targeted people who owed large sums to credit card or loan companies, and that with an ever-growing industry, it was becoming harder to police, particularly with the increase of internet debt firms sprouting up.

The MoJ also said that some of the firms shut down had been using misleading advertising, and claimed that credit card debt could be written off within 6 weeks and that 80% of credit agreements were unenforceable. Many companies also ignored requests for information from the Government´s claims regulator, or were even run by people who had convictions for fraud. Rules 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.
Some firms were actually found to be forcing debt-ridden customers to pay large up-front fees only for the service to later fall through and the client would be out of pocket.


It was pointed out however, that most claims management companies were operating within the rules, even though others chose to flout those rules and target people who already had huge debts. Misleading marketing can encourage vulnerable people who are already struggling with debt to have more financial problems in the future.

The MoJ spokesman also said: “There has been a trend towards high-pressure cold calling from call centres, including making unsubstantiated claims and encouraging people into handing over fees there and then, which is obviously a decision they regret later.”

Claims companies are bound by regulations to give customers accurate information about the realistic chances of success and the costs involved in taking up their services. Claims companies must not pressurise people into making instant decision or handing over money without considering the facts.