OFT NEWS - 35 DMP firms surrender licenses & 15 more facing action from the OFT

OFT update on debt management enforcement action

10/11 28 January 2011

The OFT today announced that 35 debt management firms have surrendered their consumer credit licences and at least 15 are facing licensing action as a result of an OFT compliance review.

The firms subject to licensing action have the right to make representations to an adjudicator before a final decision is made.

Today's announcement follows an OFT warning to 129 firms in September 2010, after its review of the debt management sector found widespread problems with compliance.

Since this warning was issued:

• 35 firms have surrendered their licences
• eight firms have been informed that the OFT intends to revoke their licences
• a further seven companies who did not respond are currently being investigated, and
• 79 firms have submitted evidence, which the OFT will now review.

All firms were asked to provide evidence of compliance measures by 16 December 2010.

The OFT is currently analysing the content of the audit reports received from 79 firms and will contact each business to discuss its findings. Those who fail to meet compliance standards may also find themselves subject to licensing action.

As well as taking enforcement action, the OFT is updating its debt management guidance to take account of new and emerging unfair business practices identified in the course of its review.

Ray Watson, Director of the OFT's Consumer Credit Group, said:

'We are determined to improve standards in this sector, as the failings identified by our review are unacceptable. Companies providing debt management services should be in no doubt that we will act against bad practice and ensure consumers are protected.'

NOTES

1. Read the press release on the OFT's September 2010 warning.
2. Details of all recent OFT actions are on the public register.
3. To read the full findings of the compliance review, please see the Debt management guidance compliance review (OFT1274) (pdf 592kb)
4. The OFT is not able to name the companies subject to today's announcement because of disclosure restrictions under Part 9 of the Enterprise Act 2002. Where the OFT uses its formal powers under the Consumer Credit Act 1974 to refuse or revoke a credit licence, decisions are made public on the Public Register.
5. The Consumer Credit Act 1974 (the Act) places a duty on the OFT to ensure that licences are only given to and retained by those who are fit to hold them. The OFT's Debt Management Guidance (updated September 2008) sets out the minimum standards for this industry. The OFT takes the view that a failure to adhere to the minimum standards in the Guidance could in certain circumstances be considered to be engaging in business practices which are unfair or improper (whether lawful or not) under Section 25(2A)(e) of the Act.
6. Adjudicators issue and determine licensing notices under the Act. They do so on behalf of the OFT, but make individual and independent decisions on fitness based on the contentions in a notice, the evidence attached to a notice and the representations of those to whom the notices are addressed. Representations may be made in writing and at an oral hearing. Adverse determinations (a refusal to grant a licence or the revocation of an existing licence) can be appealed to the Consumer Credit Appeals Tribunal. If the licence is revoked the OFT's adjudicator may, under section 34A of the Act, authorise the licensee to carry on specified activities for a specified period for the purpose of winding up or transferring its business to a properly licensed business.