Page last updated at 14:17 GMT, Tuesday, 17 February 2009

Crackdown on bogus debt adverts

Making false claims could lead to fines or closure

An official crackdown has been launched on 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 could be closed down, the Ministry of Justice has said.

The charity Citizens Advice said there had been a recent "rash" 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," said Sue Edwards of Citizens Advice.

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.

"But many credit agreements do meet the legal requirements and therefore can't easily be challenged as unenforceable," Ms Edwards added.

Criminal offence

The Ministry of Justice (MoJ) listed some of the claims currently being made in newspaper, radio and internet adverts that it said were misleading.

Among the bogus claims were:

• "Eighty percent of credit agreements are unenforceable"

• "Fifty million credit agreements are created every year, at least 25 million are unenforceable"

• "We'll get your credit cards written off within 6 weeks!"

• "Fast results guaranteed!"

• "We have a 100% success rate"

• "A positive outcome is guaranteed".

The Office of Fair Trading (OFT) pointed out that any business involved in offering advice about paying or rescheduling debts needed a licence under the Consumer Credit Act.

A claims management firm that did this without such a licence was guilty of a criminal offence and could be prosecuted.

And any debt advisory firms, licensed by the OFT, that also broke the rules on publishing misleading adverts could be closed down or fined up to 50,000.

"The OFT will not hesitate to take enforcement action against licensed claims management businesses who engage in unfair business practices by deliberately misleading vulnerable consumers about the services they offer," said Ray Watson of the OFT.

The MoJ and OFT issued a similar alert to consumer last August.

Citizens Advice said people in trouble with their debts could use its own free services at one of its local offices.

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