DAMMING REPORT FROM THE OFFICE OF FAIR TRADING

[North East Derbyshire CAB]

Hi everyone

The report certainly makes interesting reading.

NED-CAB

[Andrew Graveson]

Well done NED-CAB... "interesting reading" may well count as being the charming understatement of the year!!

My updated understanding is that 200 debt advice organisations were included in the scope of the investigation.

129 received notification from the OFT that changes/improvements were required.

I understand (based upon meeting many industry colleagues yesterday) that many of these notices relate to issues that should/could be be corrected in a fairly straightforward fashion by the companies concerned provided that they have the will and wherewithal to do so.

Dan Atkinson of The Mail on Sunday reported that of these 129, serious issues were identified at around 20 companies.
He reports industry sources suggesting that the Fraud Squad may be called into one company where the OFT discovered that client money may have been misappropriated.

As Peer Lawther of CCCS, (welcome to the forum Peer, this forum is at its best with a broad church of representation and opinion), has broken ranks to announce that CCCS were included in the investigation and "passed", I can also say that we also fell within the scope of the investigation and that our postbag has been pretty light in recent days. However standards across the board clearly need to improve so I think all smart debt advice organisations will currently be thinking about how they can continue to improve the services that they offer.

I think that the main point is that anyone worried about personal debt has a right to expect, irrespective of who they contact, that they will be told the truth, and that advice will be given to them is in their best interests rather than in the interests of the advisor.

The OFT, and trade associations (such as the DRF and DEMSA), and reputable debt charities such as CCCS, have a lot of work to do in order to ensure that the public can be confident that the industry as a whole is there to assist them in the way that they are entitled to expect.

[catullus]

Hello Peer

As an IP I'm delighted to see that you have chosen to participate in this debate.

I've read the OFT report carefully and the results of the mystery shopping exercise and copy and paste below part of paragraph 1.2 of the executive summary of the mystery shopping report

"Four mystery shops were
conducted to free-to-client organisations and, given this small sample
shopped, this report does not distinguish between commercial and freeto-
client entities."

No where else in either the OFT report or the mystery shopping report is there any reference to site visits or other work undertaken by the OFT to validate the advice given by free to client providers.

It is difficult to agree with your statement that you were "fully audited" although there is little doubt that the OFT see your services as unimpeachable. One does wonder, however, how they arrived at that conclusion if your processes have never been externally reviewed.

Do you think that CCCS would ever consider joining DRF or DEMSA who the OFT seem to be encouraging to coordinate better standards within the industry?

[MelanieGiles]

All this is going to do is establish a two-tier system where some firms are in and other firms are out - meaning little to the average consumer who tend to take the first offer of help regardless of the status or identity of the firm.

How about insolvency practitioners deciding whether they want to be members of the ICAEW or IPA or not!

I would also like to welcome Peer to the forum, and hope that you will actively engage in all aspects of our debate, as well as defending CCCS practices and guidelines. You are most welcome.

And can someone tell me who the other two "debt charities" are - indeed are they fronts for fee paying debt management or IP firms?

[catullus]

Having been subject to a very thorough regulatory review last week I would definitely rather be out!!! Sadly, we wouldn't be IP's if we declared UDI.

I would guess that the other two providers were CAB (who refer their IVA's to DFD and GT it would seem!) and Payplan.

[Andrew Graveson]

Lets be clear that the scope of the OFT investigation included providers of IVA's as well as DMP's.

I fully recognise that IP's have historically been subject to a regulatory regime that is way beyond anything that DMP companies have been subject to.

However, as the single industry that we're seen to be externally, fault is being found in very general terms at the moment. The historical regulatory environment surrounding IVA's has not prevented that being the case.

[MelanieGiles]

We know that the industry is being viewed as one, but sadly the regulatory requirements for being within the brotherhood are not. Andrew makes a good point - in that our regulators are more keen on beating us for being a couple of days late in filing an annual return, or calling a meeting of creditors where you know the paperwork will go straight into the bin, than the quality of advice provided to consumers - particularly vulnerable people.

Also the DRF/DEMSA (or whatever they decide to call themselves after the wedding) process is very expensive, adding to my concerns of a two-tier approach, which I am yet to be convinced will improve standards, and actually may drive some quality smaller firms out of business.

I continue to find it interesting to note where the CAB are placing their commercial business!

[Andrew Graveson]

The regulatory requirements are clearly much more substantial for IP's than debt management plan companies. However, I think all readers would agree that providing the right advice is a thouand times more important in the big scheme of things than filing a document on the right day?

The DRF/DEMSA process isn't very expensive. I think that isn't a fair representation of the situation. We are not a large firm but our DRF membership fees have been well justified in terms of support and information to ensure that we continue to meet the standards that are rightly expected.

A quality small firm would be able to afford to join either trade association.

It's to be hoped that the "big fishes" within the DRF and DEMSA find a way to unify the two trade associations and work with the OFT to create an industry that can be trusted by the public. Speaking to Board members of both over the last couple of days there is some surprise and disappointment that this hasn't yet been made to happen.

DEMSA has OFT Code Approval which ensures standards of business practice upon which the public can rely. The DRF has introduced an externally accedited professional qualification in debt advice, and an independant complaints panel.

Put the two together, require traders belong to a trade association, and the industry takes a major step forwards.

[MelanieGiles]

I guess in a perfect world we would all strive to provide all of it correctly, sadly some firms commercial requirements do override the quality of the advice provided and the lack of investment into quality staff training.

I gather that the DEMSA audit and accreditation process is quite pricey, as I know a couple of firms who have recently or are just about to join. Is there a difference between joining as a member, and then receiving full accreditation - or are they one and the same?

I completely agree with you about one trade body. As a member of a profession which has eight regulatory bodies for 1,800 members, we indeed live in a crazy world!

[Peer Lawther]

Many thanks for the warm welcome from so many of you, I'll endeavour to post when I can so apologies if it sometimes takes a while to respond.

The audit consisted of site visits, call listening and a full review of our policies and procedures by Trading Standards. We're happy with this – obviously regular and stringent external review is vital.

[OPTIMIST12]

Are the failing companies going to be identified by name? If not then this report is probably not an awful lot of good to the newly arrived consumer / customer.

[kallis3]

I don't think they are going to.

Could do with it though.

[Adam Davies]

Hi
There is no doubt that there is still much work to do in order to make sure that Joe Public receives the right advice at first point of contact. Companies are still promising IVAs where clearly such a solution is impossible [equity three times higher than unsecured debts]. Companies disguising debt management plans as debt consolidation programmes lasting only three years.
Such companies need their consumer credit license withdrawn until they can show that they are giving best advice.
It saddens me to see media articles such as The Mirrors "Cowboy debt management firms driving needy deeper into red", we are all tarnished with this brush and need to work together to eliminate the obvious cowboys and bring some credibility to the fee paying debt management market
Regards

[kallis3]

I wish posters could all find this forum to know who is reputable and who isn't.