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A legislated arrangement between you and your creditors.
Have You Been Ripped Off When Searching For A Loan?
Credit brokers and debt management companies can provide a very useful service to consumers by matching their financial needs to lenders willing to loan them money. Consumers often pay brokers a fee for this work, or the brokers may take a commission from the lender. Sometimes they are paid by a combination of both methods. However problems occur when companies take an up-front fee for their work and do not match a consumer with a lender. In short, they’re ripping people off and unfortunately often they know they are!
In June 2011, the Office of Fair Trading issued a guidance booklet to the finance world aimed at curbing the unfair and - sometimes downright illegal - actions of credit brokers and debt management companies. Prompted by a complaint from the Citizens Advice Bureau, who were seeing daily proof of cash-strapped individuals being taken advantage of, the new guidance lays out some of the poor behaviour UK consumers have been experiencing and the steps the OFT would be taking to combat it.
But how do you know if you’ve fallen victim to the actions of unscrupulous credit brokerages and debt management companies? Below are a few pointers on the tactics some companies can use. Forewarned is forearmed!
Not getting the information you’ve paid for
Many credit brokerages and debt management companies offer to introduce you to a lender who will provide you with a loan. The OFT found that many of them will take an up-front fee for making the introduction, yet 45% of consumers who do pay a fee end up not being offered a loan at all by a lender.
Currently there are a number of utterly fraudulent companies offering this service. At first glance they seem to offer the same service as bone fide credit brokers and debt management companies, but they differ in one important regard: they do not have a credit licence. They have literally set themselves up specifically to gather up-front fees without any intention of providing you with a service. A significant number of these companies originate from abroad.
Not getting the deal you need
You’ve paid your money up front and your credit broker or debt management company supplies you with the name of someone who is willing to give you the loan you need. Unfortunately, the OFT has discovered that you could be one of 36% of consumers who were offered an unsuitable loan that was either for shorter term or much higher APR than you need or could afford.
Not getting your money back
Under section 155 of the Consumer Credit Act 1974, you are entitled to a refund (less £5) of the fee you pay to a credit broker or a debt management company if you do not enter in a credit agreement within six month with a lender they have recommended. The OFT found that as many as two thirds (more than 66%) of consumers who are entitled to a refund will never get one.
Not wanting help in the first place
You may be sat watching the TV on a Sunday night and the phone rings. It’s a call from a credit broker or debt management company offering to help you write off your debts. The OFT found 19% of consumers have been unexpectedly called in this way, and sometimes to their detriment. Cold calling consumers is allowed as long as the companies involved stick to very strict guidelines. Specifically, you must have agreed to receive marketing calls or have your contact data sold on to third parties, they must not use high pressure sales tactics on you and they must not claim association with the Ministry of Justice to make themselves look more credible.
So how can you protect yourselves from some of these bad practices and, in some cases, protect yourself from outright fraud:
- Don’t be tempted by an unexpected cold calls or emails offering you quick and easy credit. Always shop around and get the deal that’s right for you.
- To stop unsolicited cold calls, register with the Telephone Preference Service, and never give your bank account details to cold callers.
- Make sure you check all of your bank statements very carefully if you give your financial details and decide no to go ahead. You may find a fee has been taken anyway.
- Try never to call any of these companies back, even if they leave a message asking you to. The phonecalls will be charged at a premium rate.
- If you do not take out a credit agreement within six months of being recommended a lender by your credit broker or debt management company, you are entitled to a refund minus a £5 fee.
Not every credit broker or debt management company uses the tactics outlined in this article. A great many do a good job and introduce you to lenders who can really help you sot out your finances, but if you’re aware of the games the poor ones can play you won’t be take advantage of and be able to find the best deal for your circumstances.
For more information about anything you’ve read in this article, or if you want to talk to someone in confidence about debt solutions and debt management, call one of our advisers now on 0800 193 1024.
Write Off Unaffordable Debts
Entering into Scottish Trust Deed will allow you to write off unaffordable unsecured debts leaving you a clean slate and a brighter future to look forward to. There are some debts that cannot be written off. Click here* for more information on the limitations.
Relief From Debt Pressure
Unlike an IVA which can lasts for a minimum of 60 months, the minimum time to complete a Scottish Trust Deed is 48 months (4 years) meaning you will be free from the pressures of debt quicker.
Legislated Debt Solution
Trust Deeds are a legislated debt solution, which unlike debt management, means as long as you keep up the arranged repayment plan, you can return to a more stable financial position in life and start to plan for a brighter future.
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