OFT warning on debt “sale” adverts

by Gill Montia

Story link: OFT warning on debt “sale” adverts

The Office of Fair Trading (OFT) is warning consumers not to be taken in by advertisements claiming that borrowers can offload their debts by selling them on.

People taking up such an offer can be asked to pay administration fees of £350 and so called transfer fees amounting to 10% to 20% of the debt.

According to the OFT, debts cannot legally be sold without a lender’s permission and the watchdog also points out that where the “sale” of a debt takes place, the original borrower remains legally responsible for repaying the loan.

They could therefore still be chased by debt collectors and bailiffs.

A number of scams aimed at exploiting debt laden Britons have surfaced during the recession and the OFT has promised swift action in return.

For example, a raft of fee-charging debt management firms have been offering to use the provisions of the 1974 Consumer Credit Act to nullify credit agreements taken out before April 2007.

An agreement under the Act has to state the amount of credit, the rate of interest, and the number, amount and frequency of repayments.

The absence of any of these details could potentially make some agreements unenforceable, however many more will be valid.

Earlier this year, the Ministry of Justice issued new guidance on fee-charging debt management firms and warned anyone considering using their services to seek independent advice before making a final decision.