The Government has begun to attempt to clean up the advertising of financial services after a series of misleading adverts regarding the selling of loans for managing debt.
The main areas of concern are misleading adverts by claims management firms offering to write off people’s loans or credit card debts. Firms guilty of making dubious claims to lure customers will be closed down.
Charity Citizens Advice
The charity Citizens Advice has said there has been a recent spate of bogus adverts from claims handling firms. It said statements that most loan agreements were “unenforceable” were particularly misleading.
These ads appear to offer an easy way out to people who have credit debts they are struggling to pay.
Some claims firms suggest that any credit card or personal loan agreements struck before April 2007, and worth less than £25,000, may not be enforceable if the credit company does not have sufficiently accurate paperwork.
However, many credit agreements do meet the legal requirements and therefore can’t easily be challenged as unenforceable. Anyone believing that companies offering credit would leave themselves open to this sort of legal loophole is either excessively optimistic or very silly.
The government department involved, the Ministry of Justice (MoJ), listed some of the claims currently being made in newspapers, radio, and internet adverts that it said were misleading.
Among the bogus claims were such phrases as “eighty percent of credit agreements are unenforceable,” “fifty million credit agreements are created every year, at least 25 million are unforceable,” and “we’ll get your credit cards written off within 6 weeks!”
In addition to the specific financial fallacies used, there are age-old advertising tricks such as claims that “fast results are guaranteed,” “we have a 100% success rate,” and “a positive outcome is guaranteed”.
Office of Fair Trading (OFT)
The Office of Fair Trading (OFT) has pointed out that any business involved in offering advice about paying or rescheduling debts needs a licence under the Consumer Credit Act.
A claims management firm that offers these services without a licence is guilty of a criminal offence and can be prosecuted.
Furthermore, any debt advisory firms, licensed by the OFT, that break the rules on publishing misleading adverts could be closed down or fined up to £50,000.
The Citizens Advice Bureau also pointed out that people in trouble with their debts can use its own free services at one of its local offices.
There is a certain extent to which anyone who believes an advert offering a 100% success rate in writing off debt deserves to find themselves disappointed. However, the nature of these companies is that they prey on people who cannot know any better and this is why the measures being taken are an important and positive step.
