The Office of Fair Trading is considering implementing a new rule which will prevent debt management companies from advertising through social media sites such as Facebook.
In an update to its debt management guidance, a review found that such companies were found to cause “widespread problems with misleading advertising”. It was decided that social networking sites may not be an “appropriate medium” to provide consumers with “sufficiently balanced and adequate” information.
“Before using internet-based and social media marketing, [companies] should consider whether they can exercise adequate control over its content, whether it is an appropriate medium and whether the required information, warnings and caveats can be included sufficiently prominently,” the guidance stated.
“The OFT considers that search engine sponsored links and online messaging forums which limit the number of characters are unlikely to be an appropriate means of providing consumers with sufficiently balanced and adequate information.”
The OFT has also seen a 50% year-on-year rise in complaints about companies who they describe as using “loan scams”, where consumers are asked to pay a finding fee for getting a loan.
Often, the dodgy company fails to find the customer a loan and don’t offer alternatives or refund the fee.
The OFT recommends that people are careful about who they contact concerning taking out a loan, and to be cautious about cold callers.
The new guidance for debt management comes after Citizen’s Advice made a “super complaint” to the OFT back in June.
The updates follow a review in compliance in the sector and are intended to ensure consumers have information available in order for them to make an informed decision on debt management.
The original review was published last year and the update questions the ability of sites such as Facebook and Twitter to provide advertisements which give consumers enough information.
The guidance states that fee-based debt management companies must be “fully transparent about the service on offer and fees charged”.
It requires companies to refrain from using “misleading web-based adverts” and the aim of the guide is to ensure consumers are protected.
As a result of the review and enforcement action taken by the OFT, 129 businesses have found themselves issued with a warning, 43 have surrendered their credit licenses and 11 have had their licenses revoked.
David Fisher, Director of the OFT’s Consumer Credit Group said: “This guidance is designed to leave firms in no doubt about the standards the OFT expects ad what they must do to comply with the law… debt management businesses must raise their standards or face enforcement action.”
The Citizen’s Advice Bureau offers free and impartial advice on debt management and will help consumers set up repayment schemes.