Page last updated at 14:43 GMT, Tuesday, 21 April 2009 15:43 UK

Warning on debt clearance claims

The authority reported a "sharp increase" in solicitors getting involved

Solicitors have been warned not to accept business from firms making claims offering to write-off people's loans or credit card debts.

The Solicitors Regulation Authority (SRA) said there had been a rash of misleading adverts - many online - from claims-handling firms.

Some incorrectly suggest that most loan agreements were unenforceable and so could be written off.

The SRA is investigating 10 firms under the solicitors' code of conduct.

"These adverts appear to offer an easy way out of difficulty to people who have debts they are struggling to pay," said SRA chief executive Antony Townsend.

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

Previous warnings

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

They included firms suggesting that 80% of credit agreements were unenforceable.

But 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.

Solicitors dealing with these firms could be breaching their code of conduct and so could face the Solicitors Disciplinary Tribunal, which has the power to ban solicitors from working.

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