The number of people missing credit card repayments is increasing as rising bills stretch household finances, and lenders have told the Bank of England they expect unpaid credit card debts to keep rising this autumn.
The trend is likely to increase demand for advice on dealing with debts, but consumer specialists warn that borrowers seeking help may encounter firms charging upfront fees or making unrealistic claims about writing off what they owe.
Impartial debt advice is available free of charge from debt charities, and the Financial Conduct Authority (FCA) has set out a series of checks to help people avoid being misled.
Suggestions for finding reliable help include:
- Impartial, authorised debt advice costs nothing, and providers can be found on the government-backed Moneyhelper website.
- Borrowers should check whether a firm offering debt help is authorised by the regulator, the FCA, and cross-check the authorisation details they are given against the FCA’s register.
- Anyone unhappy with the service from an authorised firm can complain, and can take the matter to the independent Financial Ombudsman Service if they remain dissatisfied.
Alison Walters, director of consumer finance at the FCA, said: “Anyone struggling with debt deserves advice that puts their interests first.
“Free, impartial debt advice is available to everyone, and no one should be pressured or misled into paying for a debt solution that may not be right for them.”
The FCA says some unregulated firms collect people’s details through cold calling or online adverts, sometimes impersonating debt advice charities or debt collectors, and then pass that information to businesses offering debt solutions that charge a fee.
According to charities, a quick search online will surface many businesses offering ways to clear debt, not all of which are trustworthy.
The FCA says warning signs of unscrupulous firms include pressure tactics, such as repeated contact by message and phone, pushing people to agree to a debt solution. Some people have been encouraged to change financial details on lenders’ paperwork, or have been “coached” on how to respond.
In other cases, borrowers have been steered towards fee-charging solutions such as Individual Voluntary Arrangements (IVAs) or some debt management plans, without alternative options being properly explained or offered first.
The regulator advises borrowers to establish who they are talking to, asking who the person works for and checking whether their details match the firm’s official details.
Vikki Brownridge, chief executive at debt charity StepChange, said: “Before making any decisions around how to deal with your debts, it’s always worth getting full, free and impartial debt advice first, exploring all options to clear your debt in the safest and most sustainable way.”
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