Before going any further with this article we need to point out that we do not cold call, if you think you have received cold calls from us please read this.
The CAB has filed a “super complaint” against debt and loan companies they say are using “unethical methods”.
The CAB claim loan finder and debt management companies are scamming tens of thousands of debtors out of substantial amounts of money. People who are typically targeted include those who have difficulty obtaining loans from mainstream banks and lenders. It is anticipated that the number of people who are targeted, and fall victim will only increase as more people find themselves in financial difficulty due to the recession.
The CAB (Citizens Advice Bureau) is a national charity having received a large number of complaints from individuals and families decided to step in and file a super complaint with the Office of Fair Trading (OFT). Furthermore, they are seeking reforms on debt management services and upfront fees. The OFT must fast track reviews of super complaints and report back in 90 days or sooner.
Unfair or unethical lending are becoming more widespread according to the CAB with many complainants reporting that they were pressured into give out bank account details over the phone, only realising later that money has been withdrawn without their consent. Most of the people who are targeted are on low incomes and are repeatedly called by the debt firms who offer to help them find a loan. However, these “loan finding” services come with a hefty fee to source the loan, which often fails to materialise. Once the fees have been removed from the bank accounts, most people find themselves unable to get their money back.
In one case, a man on a £105 per fortnight budget was contacted by phone by a loan-originating company but he turned them down. They called again, and again he rejected their offer. A few days later, he checked his bank account and £69 had been taken out as a brokerage fee – something that he’d never agreed to. When he tried to contact the company for a refund, they told him no.
Over 840 million cold calls were made by these types of debt management firms in 2009 and the OFT estimates that loan scams impact 110,000 individuals per year with a cost of £109 million or more.
Citizens Advice chief executive, Gillian Guy stated, “Current economic conditions provide fertile ground for unscrupulous credit businesses and fraudsters, increasing numbers of people are at risk of falling into debt because of job loss or a fall in income. For many, mainstream credit is out of reach and a cold call or text offering help finding a loan is naturally tempting. Our evidence suggests that rouge operators are cashing in on the desperation of people hit hard by the recession who are least able to afford it, and that this problem is set to grow much worse.”
Loopholes in the law exist that allow unethical firms to flourish. Gillian Guy went on to state “We believe that theConsumer Credit Act and data protection legislation need to be urgently updated to tackle these problems at root cause, but the situation is already so serious we are making a super complaint to the OFT and asking them to launch and immediate investigation with a view to deciding that a ban on cold calls and upfront fees is appropriate.”