Welcome for action on cowboy debt advisers

ROTHERHAM insolvency expert Paul Moorhead has welcomed the Office of Fair Trade’s investigation into the debt management industry.

The OFT has told 129 debt management firms nationally that that they face losing their consumer credit licences unless immediate action is taken to comply with its Debt Management Guidance.

The firms are required to provide independently audited evidence within three months that action has been taken to address identified concerns. If evidence is not provided, the OFT will instigate licensing action.

The formal warnings follow an OFT review of the debt management sector which found widespread problems within the industry.

Paul Moorhead, the founder of leading Rotherham-based licensed insolvency practice Moorhead Savage, welcomed the OFT’s findings.

“I often talk to clients who have been disappointed and let down by the service that they have received from debt management firms,” he said.

“Unlike licensed insolvency practitioners, debt management firms can only advise on informal debt management plans that aim to reduce repayments, rather than fully address an underlying debt problem.

“These procedures can get to the root of the problem, by rescheduling debts, reaching binding agreements with creditors and, in certain situations, writing off debt that is simply unaffordable.”

Research has shown that consumers contacting debt management companies tend to be over-indebted, vulnerable and desperate for help with managing their financial difficulties.

“In the right circumstances, debt management plans can be a useful tool to deal with short term cashflow problems,” said Paul.

“But where there are serious and long term debt problems, advice should be taken from a licensed insolvency practitioner, who acts as the gateway to the full range of legally-binding insolvency procedures that are provided by the insolvency legislation.”

For further advice on insolvency issues call Paul Moorhead and the team at Moorhead Savage on 01709 331300 or visit www.moorheadsavage.co.uk

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