DRF have responded in view of the OFT’s recent announcement regarding fee-charging debt management companies and welcomed the revoke of eight firms licenses
David Mond, Chairman of the Debt Resolution Forum, responds to the OFT’s action against debt management companies and challenges the views expressed by Money Advice Trust’s Chief Executive, Joanna Elson.
The comments of Money Advice Trust’s Chief Executive, Joanna Elson on the Office of Fair Trading’s latest announcement regarding fee charging debt management companies need to be put into context as to the realities of the position.
Of the 50 firms Ms Elson says “failed” to meet the OFT’s requirements, a substantial majority – 35 – surrendered their licences. We understand these were largely very small firms that were either not operating in the debt management market or undertaking very little work in this area, and therefore saw a licence in the debt management category as being unduly onerous to maintain.
DRF welcomes the OFT’s decision to revoke eight firms’ licences and to investigate seven more.
Far more significant is that the 79 companies that did respond to the OFT’s requirement for an independent, professional audit of their compliance with the OFT’s debt management guidance have done so. This is entirely in keeping with the fee-charging debt resolution industry’s determination to work with the OFT to create an industry that consumers and creditors can trust.
Whilst, in the past, poor practice has been rife, Ms Elson’s remarks that our industry is not in a fit state to meet the charitable sector’s growing lack of capacity to deal with the need for debt advice is becoming increasingly incorrect: The OFT’s review of its debt management guidance took place in autumn 2009 and spring 2010 and, by the time it issued its request for audits in September 2010 many firms had had months to take action on the points that had been raised at inspection and most had done so. DRF has introduced a demanding advanced BTEC for members’ staff, an independent complaints panel and independent, annual compliance monitoring by the Insolvency Practitioners’ Association. The DRF is working closely with the OFT to ensure all these elements combine to create a trade association whose members can be fully trusted.
Much of the change that is required to create this trusted industry has taken place – and the results will be clearly seen in the months to come.
Ms Elson’s comments that “people turn to fee charging debt management companies from a position of forced ignorance” and “charities don’t have the advertising budgets of fee chargers” are also inaccurate. Compliant fee-charging debt management companies are required to point out the existence of all free advice sources in their advice calls and on their websites – and do so. Industry advertising budgets have shrunk significantly and, in any case, the free sector benefits from frequent and numerous free mentions by national, broadcast and online media, often including direct links to their websites. If the playing field isn’t level, it’s sloping in the charitable sector’s favour.
The fee-charging debt resolution industry is maturing, and responding to the challenge of creating and keeping public trust. In the difficult times faced today by consumers and the reduction in public funding our industry will have more and more of a role to play, especially as it becomes recognised that those who benefit from debt advice – both debtor and creditor, can, sometimes afford to pay for it. The charitable sector is a necessary safety net for those who can’t.
David Mond, Chairman, Debt Resolution Forum