The Office of Fair Trading has issued a warning to consumers, after noticing a large increase of adverts offering to buy debts for as little as £1.
The adverts are being places by claims handling firms who offer to take over liability for credit cards, loans etc. The OFT has warned this is misleading to customers as debt cannot be transferred without the lenders permission and that the borrower would remain liable for the debts.
Ray Watson, the Credit Director for the Office of Fair Trading has advised:
"Like most scams, when something looks too good to be true, it usually is, and this is certainly the case here. You cannot simply sell on your debt and its liabilities, and businesses that make misleading claims to the contrary are just trying to take advantage of consumers' distress"
Some companies offer to take over liability for the loans for as little as £1 but they also charge additional ‘administration’ fees which result in a charge of 10-20% of the total debt value. This could lead to some consumers paying hundreds, or even thousands of pounds in minimum fees.
Consumers were warned that responding to these advertisements could lead to paying such fees and also ultimately still being responsible for the loan or credit card that was supposed to have been taken over.
The OFT are advising customers with debt problems to contact their lender to set up a suitable debt repayment plan or to contact the Citizen’s Advice Bureau.
Mr Watson also advised that the OFT would be taking action against companies misleading consumers.
“The OFT will not hesitate to take swift action against businesses which deliberately mislead consumers."
The OFT advised that some of the companies offering to pay off consumer’s debts did not have consumer credit licences and will continue working with local trading standards services to prosecute such companies for trading without a suitable license.