New advertising rules on debt management plans to protect consumers’ interests

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New advertising rules on debt management plans to protect consumers’ interests

25th November 2010

Debt management can be a financially sensitive time for many consumers who are trying to get their financial affairs in order. With many people who are in a financially vulnerable state searching extensively for debt management solutions which can help them, the Advertising Standards Authority have said that they are going to be placing restrictions on how some services promote themselves – on the basis that some of the claims made are ‘false’.

Presently, many consumers are wrongly lead to believe that some debt management plans are ‘free’, and that they will be able to consolidate all of the money they owe to creditors into one monthly payment without any additional charges, apart from some unavoidable costs. However, some of the services which are promoting themselves have been accused of labelling their products as ‘free’ despite the fact that many consumers will pay a premium on top of the debt they are trying to remove.

This premium has been seen to be present in the form of monthly tariffs which some consumers pay in addition to the repayments to clear their debt. With the tariff being believed to be quite substantial and at as much as 15%, there is a concern that some people will be paying thousands of pounds more than they should have to without knowledge.

The new regulations span across a number of bodies, including the Office of Fair Trading, ASA, the Committee of Advertising Practice, as well as the broadcasting division of this same practice. As a result, adverts placed across all platforms by profit-generating debt management providers are going to be analysed and critiqued far more than previously.

With fears that some consumers will become rather confused about which debt management plans will leave them the least out of pocket, bodies like the Citizens Advice Bureau (with branches across the country) and the Consumer Credit Counselling Service are urging those who need support to get free and impartial advice before they pursue a particular plan. In addition, there are also dozens more charities which can provide practical help in confidence online and by phone. This way, there will be an assurance that a consumer is receiving help which is appropriated to their needs, as well as financially viable.

There are some debt management companies which are going further than the codes from regulatory companies which bind them – also providing additional codes of practice in order to demonstrate how they are going above and beyond the law to help financially vulnerable consumers.

The chairman of the Consumer Credit Counselling Service had this to say: “"We know that when it comes to debt advice, desperate consumers tend not to shop around. Those marketing debt management plans have been clever at taking advantage of this and enticing customers in with the offer of a free service. Our research shows that clients on debt management plans with fee chargers, not only pay through the nose but also take a lot longer to pay off their debts.”

Now, many charities are reassuring consumers that they will be looking for advertising breaches far more now than ever before.

Posted in Debt management

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