The Office of Fair Trading (OFT) in the UK has recently issued new rules that govern the delivery of debt relief assistance in the UK. Under these new rules a number of items are considered to be unfair or improper business practices.
The OFT stated:
Businesses specialising in ‘lead generation’ use various marketing methods to generate leads, particularly online via search engines or through ‘direct marketing’. In their attempt to generate high volumes of leads these businesses often operate a large number of different websites and normally across different business sectors. In the OFT’s experience, marketing used by businesses specialising in lead generation often contains misleading content apparently designed to induce consumers into providing their personal details. It is also often not made clear to consumers that they are passing on their details to a ‘lead generation’ business rather than directly to a business offering debt management services.
It appears the deceptive nature of some lead generation websites is an issue across the pond as well as in the United States.
The OFT states that lead generators may probably need to be licensed, not an easy task, in order to generate leads if advice is given, “If during the process of generating leads and/or referring consumers on to another business, a business gives any form of advice to debtors about the liquidation of debts due under consumer credit agreements, it needs to be licensed to cover its engagement in debt counseling.”
As with recent guidance by the CFPB regarding service providers and the responsibility of companies utilizing outside service providers, The OFT expects debt relief companies to ensure the service providers they work with are appropriately licensed and the websites from which leads may be generated must be named on the consumer credit license the company holds.
In addition, service providers in the UK should be screen to ensure:
- any advice, website content or other advertising (including pay-per- click) provided/produced by that third party is clear and transparent about the nature of the service being provided and does not breach the Consumer Protection from Unfair Trading Regulations 2008
- the third party is registered with the Information Commissioner’s Office (ICO) and has processes in place to ensure that when handling personal information and passing on consumer’s personal details, it complies with relevant data protection requirements33
- when cold calling or contacting consumers directly, the third party has processes in place to ensure that it complies with the rules governing electronic marketing set out in the Privacy and Electronic Communications (EC Directive) Regulations 2003 (PECRs).
The following acts are considered to be unfair and improper.
- lead generators falsely claiming to, or implying that they, offer debt management services
- not making the true nature of the service to be provided sufficiently clear to consumers via website or other advertising content or when using other direct marketing contact methods such as, for example, telephone calls or text messaging
- failing to be sufficiently clear as to what the consumer’s details (personal data) will be used for
- failing to declare the existence of a financial interest in a lead or referral, including ‘pay per click’
- failing to declare, on request by the consumer, the nature of any relevant association, or prior arrangement, with the third party providing the service being offered, such as a debt management business
- falsely claiming or implying contact is being made on behalf of the government or charities and/or making any other false or misleading claims or statements regarding ‘status’.
- licensees dealing with ‘known’ non-compliant lead generation businesses.
- referring leads to unlicensed service providers (with a view to the service provider providing licensable services) and/or to licensed service providers who provide services of a type inconsistent with that described in advertising or in other communications to consumers
Focus is place on advertising as well. The OFT wants debt relief companies to make sure all marketing, advertising and promotion, either oral or written, is accurate, truthful and should not mislead by implication or omission.
Debt relief companies are also tasked with making sure they fully inform the consumer about ALL debt relief options available and may not omit options, such as bankruptcy, that don’t suit their sales goals.
Examples of unfair or improper business practices include failing to provide a clear and balanced explanation of all the options available to the consumer, including the relevant advantages, disadvantages, eligibility criteria, the debts eligible for inclusion, the costs, and risks associated, with each debt solution option.
Commissioned Sales Staff Must Be Closely Monitored
The OFT is very concerned about the commissioned advice sales staff may give consumers. “Licensees should not inappropriately incentivise debt advisers (including staff, agents and third parties), for example, by way of targets, commission or any other incentive, such that they might be induced to target consumers with particular debt management options, products and services, which may not be appropriate for the consumers given their individual needs and circumstances.”
As appears evident, the issue about shoving people into debt solutions based on revenue over appropriateness is a clear concern of the OFT.
Additional examples of unfair or improper business practices include:
- failing to carry out a realistic and reliable assessment, taking appropriate account of the consumer’s financial position (including income and expenditure), personal circumstances (including the reason for the financial difficulty, whether it is temporary or longer term and any previous debt management arrangement entered into, including the reason for any failure) and other relevant factors (such as reasonably foreseeable future changes to employment status), before advising consumers on a particular course of action to take
- failing to refer the consumer, where appropriate, to a not-for-profit advice organisation66 for further help.
- failing to involve the consumer in the decision making process from the outset and/or failing to take appropriate steps with a view to ensuring that he understands all of his options and the consequences and implications of any recommended course of action, in order for him to be better enabled to make informed choices
- failing to advise consumers not to ignore correspondence or other contact from creditors or those acting on behalf of creditors
- failing to explore and take account of the consumer’s reasonable expectations, desired outcome, preferences, and attitude to risk
- actively discouraging the consumer from shopping around for alternative sources of debt advice
- using technical language and jargon and not explaining the options available in a way that the average consumer could understand such that the consumer might be constrained in his ability to reach an informed decision
The Office of Fair Trading advice and guidance for debt relief companies continues far beyond these points. Having lived in the UK and held a Credit License there as a debt relief provider I do secretly chuckle when American companies complain about the level of regulation and licensing here. Can you imagine if the U.S. adopted the UK rules? How would you cope then?
How about these refund rules that are improper:
- Where it is identified that a consumer has received inappropriate/ incorrect advice, charging an additional or duplicate fee for further/ revised advice and/or failing to refund or credit the consumer in respect of fees already charged for that (inappropriate/incorrect) advice
- Failing to make an appropriate refund of fees paid (upfront or otherwise) where any, or part of, the service or outcome(s) that has been promised, under the terms of the contract or otherwise, has not been provided or delivered, at all or to a reasonable standard.
- Including any term which states or implies that there are no circumstances in which a consumer is entitled to a refund.
Be thankful for the regulation you’ve got now, as evidenced by the OFT guidance in the UK it could be oh so much tougher.
All 96 pages of the guidance are available here for your review.
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