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Citizens Advice welcomes OFT response to its super complaint on cold call credit but wants cold calls banned

1 Mehefin 2011

Citizens Advice today welcomed the Office of Fair Trading’s (OFT) response to their super complaint on cold call credit and debt management.*

A report published by the charity in March revealed how tens of thousands of people are being tricked out of large sums of money by rogue loan finder firms taking advantage of the difficult economic climate.

Citizens Advice Chief Executive Gillian Guy said:

“We are very pleased that the OFT agrees there is a serious problem and that action is needed to stop cold-call credit brokers tricking vulnerable people out of large sums of money for non-existent loans and other financial services.

“Rogue firms need to be stopped in their tracks before they get their hands on anyone’s money. Current economic conditions are providing fertile ground for unscrupulous credit businesses and fraudsters and the problem is set to grow much worse. That’s why we still believe there is a compelling case for a ban on cold calls to shut this gateway to scams.”

“Looking at closing loopholes in the law  - including a possible ban on upfront fees - and convening a round table between the industry, consumer groups and regulators to look at tackling cold calling are important steps towards tackling some of the problems we highlighted in our super complaint.  We also welcome the OFT’s consultation on new credit brokerage guidance and revised debt management guidance, and their pledge to take strong action against rogue firms.”

The super complaint

Cashing in, based on evidence from Citizens Advice Bureaux all over England, Wales and Scotland, described how victims of the recession are being targeted by firms who phone or text out of the blue offering to help find a loan. People are then charged a hefty fee for a loan that often fails to materialise, and cannot get their money back.

In many cases they are persuaded to part with bank account details only to find money is withdrawn from their account without their consent. Their details are often then passed on to other companies who bombard them with more texts and cold calls offering loans, debt management or claims management services.

CAB evidence suggests that cold calling is concentrated among credit brokerage firms that appear to target people unable to get mainstream credit because of a poor credit history, low income or current financial difficulties.

Many of the problems seen by the CAB service involve seemingly legitimate licensed credit businesses breaching current consumer protection rules. But CAB evidence also suggests that fraudsters posing as credit brokers are using the same tactics to extract bank details from people and steal hundreds of pounds from their accounts.

A big problem

Citizens Advice said these practices were widespread, with 840 million cold calls made by debt management firms in 2009 and loan fee scams affecting at least 110,000 people a year and costing the UK public £190 million annually.** They warned that these numbers are bound to rise further at a time when, according to recent estimates, up to six million households are either in arrears with bills or credit commitments or are finding a constant struggle to keep up.***

Notes to editors:

  1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
  2. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
  3. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
  4. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
  5. Citizens Advice Bureaux in England and Wales advised 2.3 million clients on 5.4 million problems from October 2013 to September 2014. For full 2013/2014  service statistics see our quarterly publication Advice trends
  6. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.