'Get out of debt' claims: misleading

Consumers should act with extreme caution before responding to businesses that promise to write-off outstanding balances on loans and credit agreements.

The warning comes from the Department of Enterprise, Trade and Investment’s Trading Standards Service, which in recent weeks, has received an increase in complaints against debt elimination companies. Thirty complaints have been received in the last six months, with 10 of these being recorded in the last three weeks.

Consumers who have taken out a loan, credit or store card are being targeted by such companies, offering to cancel debts and claim back money.

Damien Doherty, Trading Standards Service said: "Consumers are often cold called by businesses that have no detailed knowledge of the consumers' credit agreements. They claim that many of these agreements are completely unenforceable, leading the consumer to believe their debts can be cancelled and that they may be able to claim back thousands of pounds.

"Consumers who agree to avail of such services, are then asked to pay large up-front fees, often up to £500, so the company can review their credit agreements. In reality, many of the claims are exaggerated and there is only limited evidence of success, when consumers have received money back.”

Trading Standards has received a number of complaints indicating that, in many cases, action to claim back money is not being progressed. Consumers have also reported that when they attempt to contact the debt elimination business for a progress update, there is no dialling tone on the contact telephone number or they are told that the business has closed.

Mr Doherty continued: “Many consumers who have been affected by these scams say that they were led to believe that the debt elimination business contacting them was doing so as part of a government initiative to get people out of debt. They also say that they were subjected to high pressure cold calling from call centres and encouraged to make an on-the-spot decision. The debt elimination companies have also reportedly told consumers that there are 'over 25 million unenforceable credit agreements in the UK', and 'credit card debts could be written off in six weeks’. As we now know, however, many of these businesses are unable to justify these claims.”

Damien Doherty offered this advice to anyone contacted by a debt elimination business. He said: "Consumers should think very carefully before committing themselves to the services of a company that promises to write-off outstanding balances on loans and credit agreements.

“In particular, consideration must also be given before handing over hundreds of pounds in advance, even when refunds are promised if the claim to write-off debts is unsuccessful. I know of one local consumer who has lost £1500 to a company that has ceased trading.

“Consumers who feel they have been duped and have a case against such companies, should initially make a complaint to the trader in question. If this fails, they should consider taking the complaint to the Financial Ombudsman Service (FOS). The FOS is completely free to use, and will adjudicate on whether a claim should be paid out. However, if the complaint is complex, and the consumer wishes to use the services of a bone-fide debt elimination business, then it is highly advisable to carry out research and opt for a reputable 'no win, no fee' handler.

"Furthermore, consumers should never give out credit card details over the phone to anyone they do not know. If the caller and business is legitimate, they will allow time for consideration to the service on offer and will not exert pressure for an instant decision."

Damien concluded: “Like most scams, when something seems too good to be true, it usually is, and this is certainly the case here. While there is evidence that certain loans have been mis-sold, such as in the area of payment protection insurance, there are many that have not. It is vitally important that consumers are given clear information about the options available for pursuing their claim, as well as the realistic chances of success and the costs involved.”

Consumers who have complaints about debt elimination businesses should also contact Consumerline on 0845 600 6662 or 028 9025 3900 or alternatively log on to the Consumerline website

Notes to editors:

1. Payment Protection Insurance Factsheet
2. All businesses must comply with the Consumer Protection from Unfair Trading Regulations 2008 which came into force on 26th May 2008. The Regulations create a number of offences in relation to unfair commercial practices, misleading actions, and misleading omissions.
3. For media enquiries please contact the DETI Press Office, telephone 028 9052 9297. Outside office hours, please contact the Duty Press Officer via pager number 07699 715 440 and your call will be returned.