First Step Finance Limited, a large debt management company based in Stockport, can no longer trade in any business requiring a credit licence after the OFT identified serious concerns about the transparency and integrity of its practices.
The OFT made a decision to revoke FSF's licence in November 2012 after finding that among other things, FSF's advertising, marketing and other information failed adequately to highlight the risks or costs associated with using its services.
FSF made, but then withdrew, an appeal against this decision, following which the OFT authorised it to trade for a short period, subject to strict conditions to protect consumers, so it could wind down or transfer its business. This period has now passed and FSF's consumer credit business has been transferred to another business.
Welcome Solutions Ltd, a Lancashire-based debt management company, has had its credit licence revoked after it too withdrew its appeal against an OFT decision to refuse to renew its licence. The OFT found that WSL, which traded as 'debtsorters.co.uk', had engaged in unfair or improper business practices, including falsely claiming or implying that its debt advice was provided on a free and impartial basis, and also publishing misleading or false customer testimonials.
Another OFT decision not to renew a licence of a debt management firm has also been upheld at appeal. Manchester-based Debt Connect (UK) Limited (DCL) was found to have engaged in a number of unfair business practices, including providing misleading and inaccurate information to consumers and failing to implement proper practices and procedures.
In upholding the OFT's decision, the First Tier (Consumer Credit) Tribunal concluded that Mr Sharma, the Managing Director and compliance officer of DCL, has 'insufficient skill, knowledge and experience to enable him to guide DCL and its employees through the requirements they must meet in order to discharge their responsibilities as a consumer credit licence holder operating in an area with a high risk of consumer detriment'.
Since the OFT's 2010 review of the debt management sector, over 100 businesses have exited the market or been refused licences to enter the sector.
David Fisher, OFT Senior Director of Consumer Credit, said:
"We have been tackling bad practices in the debt management sector as a priority since our report in 2010 showed widespread breaches of credit guidance that were causing distress to people already in financial difficulty. These results are the latest in our continuing efforts to improve practices across this sector.
"We expect businesses in the debt management sector to behave with integrity and treat their customers fairly. They must be transparent about the service they are selling, making clear to prospective customers the costs they will incur and the risks they take. We will not hesitate to revoke the licences of debt management businesses that fail to do so."
Beverley Budsworth of The Debt Advisor said:
“Many thousands of clients will have been affected and potentially suffered as a result of practices which were not necessarily in the clients’ best interest. The introduction of the Protocol Compliant Debt Management Plan or P-DMP will help to materially improve standards in the industry. The Protocol badge will help consumers to identify and choose providers who have a higher standard of customer service than require by law.”
