The Office of Fair Trading has given a warning to a debt management company after finding it advertised free services even though consumers were being charged.
The company, which trades as Carefree Debt Solutions, has been warned it cannot claim that it provides a free service if a fee is payable at any stage - including administration, nominee and upfront fees - even if its initial advice is free.
The debt management firm has also been told that its advertising and promotional materials must not claim or imply that savings will be made by rescheduling debts without making it clear that it will lead to an increase in the sum to be repaid and the length of the repayment period.
And the firm has been warned it can not claim that it can guarantee a favourable outcome when negotiating with creditors, or that the debtor will be debt free in a certain period of time without explaining the adverse consequences on a credit rating.
Steven Jackson of Beatmydebt.com welcomed the news. "It is vital that all companies operating to help people resolve their debt problems are absolutely up front and honest about how debts will be dealt with, how long it will take to become debt free and associated charges.
Where this is not happening to OFT must act to ensure that often vulnerable people are protected from fraudsters" he said.
Misleading material
Carefree Debt Solutions, which advertised on its website "our partners can get you back to financial ground zero", has also been required to explain all the advantages and disadvantages of debt solutions when providing advice to consumers.
Ray Watson, director of the OFT’s Consumer Credit Group, said: "The OFT will not hesitate to take action against any debt management business which uses material that misleads consumers.
"The requirements imposed on Carefree Group Ltd will ensure that the company’s advertising will not in future contain claims that are inaccurate. We will monitor these requirements closely and take further action if necessary."
If Carefree Debt Solutions breaches any terms of the requirements the OFT can award penalties of up to £50,000 per breach.