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CHESHIRE, ENGLAND, January 26, 2013 /24-7PressRelease/
-- The new guidance is in response to a super-complaint made to the OFT by The Citizens Advice Bureau
last March as a result of it's report Cashing In, which revealed how tens of thousands of consumers have been targeted by unscrupulous brokers
and debt management companies
and tricked out of large sums of money. It details rising instances of dubious practices from brokers and debt management companies, including cold calling or texting consumers
offering to help them get an unsecured loan, and taking up front fees for credit brokering but not providing a service, often resulting in consumers unable to get their money back. Sometimes these firms even persuade consumers to part with their bank details and take unauthorised payments
investigated the claim and found substantial evidence that concurred with that of the Citizens Advice Bureau. OFT's Chief Executive, John Fingleton
, said "Our evidence suggests some businesses are deliberately taking people's money upfront with no realistic expectation of finding them the type of loan they need.
"We will continue to take robust enforcement action
against businesses using unfair or improper business practices and we are providing new guidance making very clear the kind of behaviour we expect from the industry. We are also asking the Government to look at the impact of a ban on upfront fees."
Citizens Advice's Chief Executive Gillian Guy
said: "We are very pleased that the OFT agrees there is a serious problem and that action is needed to stop cold-call credit brokers tricking vulnerable people out of large sums of money for non-existent loans and other financial services.
"Rogue firms need to be stopped in their tracks before they get their hands on anyone's money. Current economic conditions are providing fertile ground for unscrupulous credit businesses and fraudsters and the problem is set to grow much worse. That's why we still believe there is a compelling case for a ban on cold calls to shut this gateway to scams."
The new credit brokerage guidance is relevant to all financial companies, not just brokers and debt management firms, and stipulates that:
1. Consumers have the right to a refund of an up-front fee
where no introduction is made to a lender
2. If after six months the consumer has not managed to secure a loan they are entitled to a refund of their up-front fee as part of the statutory rights.
Those firms found to be using poor credit practices will be dealt with swiftly and risk fines and their credit licenses being revoked.
A spokesperson for leading Individual Voluntary Arrangement provider
, IVAonline.co.uk, said: "It's about time something was done about this growing problem. Individuals in debt are vulnerable
and often desperate to escape the problems it can create. Debt Management firms that deliberately target these people knowing full well they intend to take their money and give little or no service in return are often fraudulent and simply cashing in on the fear generated by the economic climate. Having a credit licence
is not a permit
to generate money at any cost. It means you have a serious responsibility to your clients and that includes giving them the best value service and advice possible.
IVA Online specialists in the IVA debt solution, which can alleviate you from your debt problems in as little as 60 months and will allow you to write off up to 70% of your debts. Visit our website now or call us for friendly, no obligation advice.
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