DMP, IVA or Consolidation Loan?

The Office of Fair Trading (OFT) has issued a warning to consumers over companies who are sending out unsolicited material advising they cancel their individual voluntary arrangements (IVAs) and instead make alternative debt management plans; namely, bankruptcy.

The OFT consider such sales methods to be both unethical and in breach of its debt management guidance. It has issued warnings to 12 companies over such action and has warned them that failure to change their approach and strategy of the advertising of IVAs and debt management plans could lead to revocation of their consumer credit licenses.

Of most concern to the Office of Fair Trading is the way the companies have allegedly exploited the Insolvency Service’s public register of people in IVAs in order to target vulnerable consumers. The government department also expressed concern that the companies in question do not fully explain the pitfalls of exiting an IVAs agreement early or of the potential consequences of bankruptcy.

Ray Watson, the OFT’s director of consumer credit, comments, “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.”