Page last updated at 06:00 GMT, Saturday, 7 March 2009

Watchdog shuts down debt websites

By Susannah Streeter
Business reporter, BBC News

The OFT is seeking to close 27 debt management sites

The Office of Fair Trading (OFT) is taking action against more than a dozen businesses which set up repayment plans for people struggling with debt.

The watchdog says these debt management companies are deliberately misleading consumers by using website addresses similar to non-profit organisations.

In actual fact, they are commercial enterprises, the OFT says.

The regulator says it believes a substantial number of consumers could have been deliberately misled.

It has written to 13 companies who run 27 websites and has told them to shut them down.

The regulator says if the firms do not comply, they could lose their consumer credit licences. If the companies are not licensed, they could face prosecution.

'Deliberately misleading'

"There is a danger that with increasing unemployment, more people could run into financial difficulty and we are concerned that at the point where they are most vulnerable and seeking advice, they are being deliberately misled by people who are trying to gain a commercial advantage from them," says Ray Watson, director of credit at the OFT.

"We believe they are misleading consumers by holding themselves out as free advice agencies such as Citizens Advice, the Consumer Credit Counselling Service, the Money Advice Trust and Advice UK."

If people aren't sure if the advice really is free and independent, they should look carefully at the website
Joanna Elson
Chief executive, Money Advice Trust

The OFT have not named the 13 companies, but Citizens Advice has been worried for some time about debt management companies which use words that could give the impression they are connected with government organisations or the CAB.

"We are very pleased the OFT is now taking action," says Teresa Perchard, director of policy at Citizens Advice.

"For several years now, we have been getting reports from people approaching the CAB who have been worried about sites and telephone calls they have had from people operating advice sites who have names very similar to ours. This action should mean that we see an end to that."

As our debt mountain has grown, the number of businesses offering advice and solutions has increased rapidly.

Citizens Advice's Teresa Perchard says debt websites need to be clearer

There are now countless debt management companies advertising online which are perfectly legal as long as they have a consumer credit licence and adhere to the OFT's debt management guidance.

They are also well within their rights to charge for their services.

But charities like the Money Advice Trust say this should be made clear. It is warning consumers to do their homework before signing up for a debt management plan.

Chief executive Joanna Elson says: "If people aren't sure if the advice really is free and independent, they should look carefully at the website. An easy way is to look at the 'About Us' section to find out who funds it and who is behind it.''

The OFT is urging consumers to be vigilant when searching for debt advice online. If people have concerns, they can check out companies and websites on the OFT's consumer credit register.

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