OFT imposes requirements to end misleading claims

81/10 12 July 2010

The OFT has imposed requirements on a debt management company, Carefree Group Ltd, in respect of its advertising of debt management services. The requirements also apply to an associated licensee, trading as Carefree Debt Solutions, and cover all types of advertising, including websites.

As a result of the requirements the OFT has imposed, Carefree Group Ltd's advertising and promotional materials must:

not claim or imply that the service is free if a fee is payable at any stage and include details of all fees prominently in the advertisement
not claim or imply that savings will be made by rescheduling debts, without making it equally clear that this will lead to an increase in the sum to be repaid and the length of the repayment period
not claim that it can guarantee a favourable outcome when negotiating with creditors
not claim that the debtor will be debt free in a certain period of time without explaining the adverse consequences on a consumer's credit rating, and
explain all of the advantages and disadvantages of each debt solution when providing advice to the consumer.

Ray Watson, Director of the OFT's Consumer Credit Group said:

'The OFT will not hesitate to take action against any debt management business which uses material that misleads consumers. The requirements imposed on Carefree Group Ltd will ensure that the company's advertising will not in future contain claims that are inaccurate. We will monitor these requirements closely and take further action if necessary'

NOTES

Download Carefree Group Ltd's requirements (pdf 68kb).
The OFT issued guidance for providers of debt management services in 2001 (updated September 2008). The Debt Management Guidance (the Guidance) sets out minimum standards of behaviour expected of licence holders and applicants who seek to re-schedule customers' repayment of debt and charge for doing so (the Guidance also applies to the free advice sector).
In November 2009, the OFT launched a review of compliance with the Guidance and will issue a findings report in the summer. Read press release 130/09 issued in November 2009 which noted the rise in internet based advertising and the need to include a sweep of online debt management advertising as part of the review process.
Under the Consumer Credit Act 1974, where the OFT is dissatisfied with any matter in connection with a business, a proposal to carry on a business or any other conduct by a licensee, associate or former associate, the OFT may impose 'requirements' on the licensee. Requirements may require a business to do or not to do (or to cease doing) anything specified for the purposes connected with addressing the OFT's dissatisfaction, or securing that matters of the same or a similar kind do not arise.
A breach of a requirement can lead to a fine of up to £50,000 and/or be grounds for revocation of a consumer credit licence.

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