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Press releases 2002 -

OFT launches debt management compliance review

PN 61/02    26 September 2002

Fee charging debt management companies' (DMCs) compliance with minimum standards for the industry will be examined in an OFT compliance review announced today.

The review will gather information from customers, providers of free debt advice, DMCs and trade associations, and will include:

  • a review of advertisements and marketing to ensure they are accurate, clear and not misleading. For example, any reference to 'savings' on repayments must make it equally clear that debt rescheduling will usually lead to an increase in the size of the sum to be repaid and could affect the consumer's credit record
  • a complaint form for use by trading standards, Citizens Advice Bureaux and other free debt advisers to help gather information on possible breaches of OFT guidance on the sector. The complaint form will also be sent to consumers who complain directly to the OFT
  • consultation with DMCs and trade associations to discuss compliance issues
  • a questionnaire for providers of both free and fee-charging debt advice on the operation of the guidance to date.

In December, the OFT published guidance on minimum standards to help ensure DMCs deal fairly and openly with consumers. Companies were warned that breaches of the debt management guidance could lead to the loss of their consumer credit licence. Under the Consumer Credit Act, it is a criminal offence to operate a DMC without a consumer credit licence.

Launching the review, John Vickers, Director General of Fair Trading, said: 'This review will check on the debt management industry's compliance with the minimum standards set down in our guidance. We welcome evidence from consumers, debt advisers or any other sources.'

The OFT cannot intervene in individual cases, but evidence from consumers will help the OFT determine whether DMCs are complying with the guidance.

Consumers with complaints should either email phone 08457 22 44 99 or write to Credit Licensing Enforcement, Office of Fair Trading, Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX.


1. The OFT guidance for DMCs was published on 4 December 2001. Copies of 'Debt management guidance' can be ordered or downloaded from the Publications section of the OFT website (on the publications page select 'Business leaflets' and then 'Consumer credit licences'), by telephoning 0870 60 60 321 or by e-mailing

2. The guidance includes the following requirements:

  • consumers must be given adequate information before entering into an agreement. Contracts should specify the nature of the services provided, total cost to the consumer, amount to be repaid and duration of the contract. Contract terms should be fair, legible and in plain language
  • a realistic assessment of the customer's financial circumstances must be made before advice is given, including verification of income and regular outgoings and any advice must be in the best interests of consumers
  • debt management companies must inform clients of the outcome of negotiations with creditors, as well as any developments with creditors such as the issue of default notices or the threat of legal action
  • advertisements and marketing must be accurate, clear and not misleading. Any reference to 'savings' on repayments must make it equally clear that debt rescheduling will usually lead to an increase in the size of the sum to be repaid and potentially affect the consumer's credit record
  • no cold calling by personal visit
  • payments from consumers should normally be passed on to creditors within five working days of receipt of cleared funds.

3. In May 2002 the OFT published an additional commentary on the guidance for the free debt advice sector. Copies can be ordered or downloaded from the Publications section of the OFT website (on the publications page select 'Business leaflets' and then 'Consumer credit licences').

4. Copies of the complaint form can be downloaded in Word format (90 kb)  and pdf format (52 kb).   

5. Organisations who provide debt management services are required to be licensed under the Consumer Credit Act 1974. Other businesses which require a licence include consumer credit and hire businesses, credit brokers, debt collectors and credit reference agencies.

6. Under Section 25(2)(d) of the Consumer Credit Act 1974 the OFT must, when determining whether or not a licensee is fit to hold a licence to carry on a business covered by the Act, consider evidence that the licensee has engaged in business practices appearing to be deceitful or oppressive or otherwise unfair or improper (whether unlawful or not).

7. Decisions to revoke a consumer credit licence are made by an adjudicating officer for and on behalf of the OFT. Before a licence is revoked the adjudicating officer issues a 'minded to revoke' notice to the licensee. The licensee is then given the opportunity to make representations before a final determination is made. In the event that the determination is adverse, the licensee has the right to appeal against the determination to the Secretary of State for Trade and Industry.

8. In this press release the functions of the Director General of Fair Trading (DGFT) under the Act are for simplicity described as the functions of 'the OFT'. The Enterprise Bill proposes to replace the office of the DGFT with the OFT, to which would be transferred the DGFT's functions.

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