One hundred companies claiming to offer debt management services or personal injury compensation services have been closed down since April 2007, according to statistics from the Ministry of Justice.
The MoJ claimed that it was successful in closing down a large number of rouge debt management companies, who made misleading claims to customers over personal finance problems and supposed debt loopholes. These claims included suggesting that as many as 80% of credit agreements could be unenforceable and that credit card debts could be written off within six weeks – both claims disputed by financial regulators.
MoJ spokesman Kevin Rousell also accused the companies of using high-pressure sales techniques to exploit the most vulnerable in society.
Other companies were found to be in breach of rules that preventing cold-calling potential customers in person. Other rules which were ignored were those that allow customers a cooling off period of at least 14 days for anyone considering taking up an agreement.
Others were found to be forcing struggling customers to pay large up-front fees only for the service to later fall through.
Despite this, Mr Rousell said that the majority of companies were operating legally but insisted that the MoJ would continue to clamp down on those that breach regulations.
"However, some companies choose to flout those rules and some also target consumers who find themselves in debt," he said.
"People desperate for a way out of their financial troubles can be vulnerable to the misleading marketing that the Ministry of Justice Claims Management Regulator is continuing to tackle.
"There has also been a trend towards high-pressure cold-calling from call centres, including making unsubstantiated claims and encouraging people into handing over fees there and then - a decision they regret later."
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