I am pleased to be able to report to you today DRF’s success in influencing the Office of Fair Trading’s response to the Citizen’s Advice super complaint on up-front fees and cold-calling by the credit brokerage and debt management sectors.

DRF’s submission to the OFT advocated a ban both on up-front fees and cold-calling but strongly pointed out that the industry did not charge up-front fees before providing a service and did not cold-call, but rather usually called consumers who had consented to the call but could not recall doing so.

I am pleased to be able to tell you that both these points were accepted by the OFT and that, thus, major threats to both the way in which we obtain business and the manner in which we are rewarded for the work we do, have been averted.

Specifically, the OFT report says:

“However, the evidence that the OFT has collected during its consideration of the super-complaint suggests that initial arrangement fees, provided that they are proportionate to the value of the service that is being provided, and that their level and use is transparent to the consumer, may assist debt management businesses to manage the consequences of the risk that a consumer will default on a repayment plan early in the lifetime of the agreement. Preventing debt management businesses from charging initial arrangement fees may, therefore, reduce the availability of debt management services to consumers in financial difficulty…

“… The OFT does not, at the present time, consider that further or revised legislation regarding the charging of initial arrangement fees by debt management businesses is required”.

And:

“It would appear that the majority of the unexpected marketing calls, emails and texts received by consumers are being made with consumers’ consent. This contact is not therefore regarded by businesses as being cold calling. In their responses to an OFT questionnaire issued to credit brokers and debt management businesses, most businesses told us that they do not use cold calling, but may instead use what they describe as ‘warm calling’. Such ‘warm calling’ involves contacting consumers who these businesses say have, at some stage, either directly given their
consent for that business to contact the consumer, or the consumer has indirectly given consent by agreeing that another business can pass their details to a third party…

“… At the present time, the OFT does not consider it appropriate to recommend that the Government considers legislation to ban cold or warm calling. …

“… The OFT also notes that unexpected calls will not in themselves always cause consumer detriment. Indeed, some consumers who were unaware of the existence of a service may, for instance, benefit from an unexpected call even if they did not remember giving their consent to receiving it.”

The OFT’s press release can be found here: OFT announces package of measures to address concerns over credit practices and their full response here: Marketing and charging practices in the sub-prime credit brokerage and debt management sectors (pdf).

The report requires careful reading.

Whilst I am pleased to be able to report this success, it is clear that the OFT’s forthcoming updated Debt Management Guidance will include specific measures to minimise consumer detriment from cold-calling, where it happens.

This is another example of DRF working to develop a trusted industry body and to  further the interests of its members. We regard this as a major step forward in creating understanding of the way the best debt resolution companies work and in gaining acceptance of the need for our services.

We will continue to represent members interests robustly in the months to come.

Yours sincerely,

David

David Mond
Debt Resolution Forum Chairman