Debt management sites 'tricking cash-concerned consumers'

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By Rachel Jones
Know Your Money Editor

Some websites are taking advantage of the debt management woes of Britons by posing as government or charity online advice forums for individuals searching for financial help. But the Office of Fair Trading (OFT) has told 11 financial management businesses with "look alike" websites to close them down immediately. Consumers are tricked into thinking the websites have their best interests at heart because the companies use similar domain names to legitimate sources of advice such as the Consumer Credit Counselling Service, Citizens Advice, Advice UK and the National Debtline.

"The OFT will take action against businesses that use look alike websites to mislead consumers into believing they are dealing with established charitable or not-for-profit organisations.

"Consumers are also reminded that they should not deal with any company that does not have a consumer credit licence. These unlicensed businesses are unregulated and consumers may have no means of redress if things go wrong," advises Ray Watson, OFT director for consumer credit.

But with the problem of debt management increasingly spiralling out of control for Britons, many may turn to websites and, in their financial panic, may not realise that the information they are receiving could not be the best for their cash-concerning circumstances.

Debt deliberations deepen

At the end of January, total UK personal debt stood at £1,457 billion, new figures released by Credit Action show. The average household debt, excluding mortgages, stands at around £9,550, although this increases to £59,730 when home loans are taken into account. The research also reveals that the average interest forked out by each household for the cash they owe tops £3,000 every year. Furthermore, a property is repossessed every ten minutes.

And despite the falling cost of oil, 6.5 million households are in debt to their energy supplier, a new uSwitch.com report reveals. Last year saw energy prices rise by around £381. This has meant that the amount that an average household owes their energy supplier has shot up by 11 per cent to currently stand at £126. Over 50 per cent of households admit that they now owe more money to their gas or electricity provider than they did the same time last year.

It could be argued that Britons worried about falling further into the red are turning to debt management websites to help protect them from the economic storm. But, as the OFT has discovered, dodgy websites have been rooted out and their owners face prosecution if they do not cease taking advantage of debt-ridden households.

Getting finances on track the right way

Citizens Advice, which complained to OFT about the bogus websites, welcomes the move, describing the "strong warning" to companies as a message that their behaviour will not be tolerated.

"However this is just the start and in the current economic climate when more people are seeking debt advice, many for the first time, it's vital that the OFT continue to take a hard line with companies deliberately setting out to mislead the public, many of whom may be in unmanageable debt and in urgent need of quality advice," the organisation says.

Citizens Advice also urges people who wish to climb back into the black to contact themselves or a free and impartial debt advice source such as the Consumer Credit Counselling Service or National Debtline. Indeed, responsible support groups will help consumers to negotiate with their creditors and work out the best way to organise repayments and benefits that some Britons may be entitled to.

Indeed, individuals concerned about which websites are genuine should visit OFT's Consumer Credit Register, which reveals the details about which websites are licenced to dish out debt management information in the UK. The register can be found . Such a move could be especially important after the survey from Credit Action also shows that unemployment increased at a rate of 1,600 people every day in the last three months of 2008.

The first step that households with a financial headache should take is to take a "back to basics" approach with their money, the Institute of Financial Planning (IFP) urges. With the help of a financial expert on a registered debt website, individuals could find that keeping track of incomings and outgoings is made much easier.

Alan Dick, a financial planner and director of consumer affairs at the IFP, states: "It is essential that Joe and Josephine Bloggs get a firm handle on their income and expenditure by creating a carefully constructed budget. This is likely to highlight areas where they can make savings in expenditure through changing consumption patterns but also through minimising wastage from paying too much tax or charges."

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