UK Money News
5th June 2008
OFT issues warning over debt letters
Consumers have been warned not to respond to unsolicited mail that urges them to cancel their individual voluntary arrangement (IVA) and opt for an alternative debt management solution.
According to the Office of Fair Trading (OFT), the letters typically recommend that recipients chose bankruptcy instead of their IVA, but do not explain what the consequences of this might be.
These can be financially damaging, the watchdog warns, because much of the initial sum paid to a company on setting up an IVA goes towards meeting the insolvency practitioner's fees and not paying off the debt itself.
After uncovering evidence that companies were engaging in the practice, the OFT has now sent letters to 12 companies ordering them to stop.
Ray Watson, OFT director for consumer credit, said: "Tackling companies who are engaging in unfair business practices by targeting vulnerable consumers with misleading advice and information, particularly if it leads to consumers becoming more over-indebted, is a key priority for the OFT.
"We expect any advice and/or information given to debtors to be in their best interests and it should include a full explanation of the implications of offers or advice."
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