OFT & MoJ warning: Companies claims on "unenforceable" or "unfair" credit agreements

Claims regulator and OFT issue consumer alert.

Claims regulator and OFT warn consumers about risks of being misled over the enforceability of consumer credit agreements

MoJ/OFT Consumer alert 21 August 2008

The Claims Management Regulator at the Ministry of Justice and the Office or Fair Trading (OFT) are warning consumers to think carefully before responding to businesses claiming that they can arrange for outstanding balances under loan, credit card and other consumer credit agreements to be written off and secure compensation.

Consumers are advised to seek independent advice before using the services of businesses that offer to find ways to render consumer credit agreements unenforceable. Businesses can only provide claims services if they are authorised and regulated by the MOJ under the Compensation Act 2006. Such businesses may also need to hold an appropriate OFT consumer credit licence.

Consumers may be asked to pay large up-front fees, often up to £500, for the businesses to review their credit agreements. Some businesses are claiming that many of these agreements are completely unenforceable, that consumers can have debts cancelled and claim back thousands of pounds. Consumers should think very carefully before committing themselves to making claims and handing over hundreds of pounds in advance to do so, even where refunds may be promised if the claim is unsuccessful.

Consumers with specific debt problems may wish to contact their local Citizens Advice Bureau who will often be able to provide advice free of charge. Free, impartial advice can also be obtained from the contacts at the end of this alert.

NOTES Claims management regulation

1. The Ministry for Justice (MoJ) is the Claims Management Regulator in England and Wales. Ministry of Justice checks a wide range of information about businesses before authorising them, monitors the services the business provides, will take action against businesses that breach the rules, which could include suspension or cancellation of authorisation.

2. Authorised businesses have to follow strict conduct rules. They must not ‘cold call’ in person, or engage in any form of high pressure selling, give written information on how to pursue a claim and the costs involved before a contract is agreed, allow a ‘cooling off’ period of at least 14 days after signing a contract in case the consumer changes their mind, operate a customer complaints scheme that meets relevant criteria. All the rules governing the conduct and behaviour of authorised businesses can be found on the Claims Management Regulation website.