In January 2013, consumer credit regulator the Office of Fair Trading (OFT) announced that it has refused the applications of two debt management firms to renew their Consumer Credit Licence, and had not granted a licence to a new applicant.
Debt Connect (UK) Ltd, a Manchester-based debt management firm, lost its licence because the OFT had concerns over a number of its business practices, including the information it was providing to its customers. Its associate claims management company Connected Claims Ltd has also lost its licence. Debt Connect has said it is shocked by the OFT’s decision, and has exercised its right to appeal to the First-Tier Tribunal (Consumer Credit). It will continue trading as usual while the appeal is heard.
Welcome Solutions, based in Lancashire, and which trades as debtsorters.co.uk, had its renewal application declined because the OFT ruled it was incorrectly suggesting that it provided free and impartial debt advice. The regulator also had issues regarding the content of its advertising and the reliability of the customer testimonials it published. Welcome also has 28 days from the date of the OFT decision to launch an appeal. As of mid-February 2013, the company website suggested it was business as usual and made no mention of the OFT judgement.
At the same time it was announced that a new licence application from Cornwall-based Rowena Koning has been declined, with the OFT suggesting she lacked the necessary experience to run a consumer credit business, and saying she would have required considerable third-party compliance support. Ms Koning’s appeal to the First-Tier Tribunal has already been dismissed.
The OFT press release added that “all three traders lacked the necessary skills, knowledge and experience to operate compliant consumer credit businesses in the debt management sector.”
Commenting on the decisions of his organisation, David Fisher, OFT Director of Consumer Credit, said: “The OFT will not hesitate to refuse licences to those who cannot establish that they are fit to operate a debt management business and we will revoke existing licences when necessary. Our goal is to ensure that people in financial difficulty who pay for debt advice can be confident that they are dealing with businesses that are competent to give them good advice.”
In September 2010, the OFT published the results of a review into standards in the debt management sector, and warned 129 firms that they risked losing their licence unless they changed their practices. The main areas of concern identified were: misleading advertising, with particular regard to fees charged; poor competence levels amongst debt advisers; and lack of awareness of the Financial Ombudsman Service complaints procedures. Since September 2010, over 100 debt management firms have ceased trading.