By Max Clarke

The Government’s independent consumer watchdog, the Office for Fair Trading, has launched an “ongoing robust, targeted enforcement action” campaign addressing debt management companies after a series of abuses were exposed.

Rogue credit broker companies were found to be taking money from the indebted without paying off their creditors, compounding the financial woes of the nation’s most financially vulnerable.

“Our evidence suggests some businesses are deliberately taking people's money upfront with no realistic expectation of finding them the type of loan they need,” explained OFT chief executive, John FIngleton.

An estimated 270,000 UK consumers paid an upfront fee to a sub-prime, unsecured credit broker in the last 12 months, typically between £50 and £70, on the expectation of being offered an unsecured loan. Complaints to Consumer Direct about these upfront fees more than doubled between 2008 and 2010.

The OFT is also asking the Government to consider whether new legislation is needed to address problems in the sub-prime unsecured credit brokerage market, including a possible ban on upfront fees. These measures are detailed in the OFT's response to a super-complaint from Citizens Advice, published today.

“We will continue to take robust enforcement action against businesses using unfair or improper business practices and we are providing new guidance making very clear the kind of behaviour we expect from the industry. We are also asking the Government to look at the impact of a ban on upfront fees.”

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