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OFT warns consumers about ‘debt sale’ scams

Companies 'buying' debt are misleading consumers

The Office of Fair Trading (OFT) has warned consumers not to be taken in by businesses claiming to help them become debt free by ‘buying’ or ‘selling on’ their debts.

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The OFT‘s warning follows a significant increase in the number of adverts on the internet and in newspapers from debt and claims management companies that misleadingly state they can take over liability for debts or write off debts by purchasing consumers’ credit agreements.

Consumers still liable for ‘sold’ debts

A statement from the OFT confirmed that the law does not allow the sale of debt without the lender’s permission and so businesses that suggest otherwise are making clearly misleading claims.

In fact, consumers who ‘sell’ their debts to one of these businesses, either directly or through a broker, will still be liable for their original repayment obligations as well as losing the money they paid for this false service. They will also still be subject to any debt collection activity and negative credit scoring associated with the original debt.

Unlicensed firms to be targeted by OFT

The principal regulator for claims management companies is the Ministry of Justice. However, those businesses that operate in the debt sector also need to be licensed by the OFT.

According to the OFT, some of the firms offering these debt purchase services do not have consumer credit licences. The OFT is working in partnership with local trading standards services to prosecute them for unlicensed trading. Furthermore, formal action has already been initiated against licensed companies whose advertising or websites are making these misleading claims.

Debt sale ‘too good to be true’

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Decide which debt is the most expensive, and pay this off first

Ray Watson, OFT Director of Credit, said: ‘Like most scams, when something looks too good to be true, it usually is, and this is certainly the case here. You cannot simply sell on your debt and its liabilities, and businesses that make misleading claims to the contrary are just trying to take advantage of consumers’ distress.

‘The OFT will not hesitate to take swift action against businesses which deliberately mislead consumers. Consumers with debt problems should contact their creditor to arrange a repayment plan or their local Citizens Advice Bureau who will be able to provide free advice.’

Which? debt advice

Which? debt expert Martyn Saville said, ‘Consumers shouldn’t be fooled into ‘selling’ their debts. As the new warning from the OFT shows, without your lender’s permission to transfer the debt, you could still be liable for what you owe. If you’re struggling with debts, speak to your lender and seek independent, free debt advice directly from reputable organisations such as the Consumer Credit Counselling Service [0800 138 1111], National Debtline [0808 808 4000] or your local Citizens Advice Bureau.’

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