A claims management company was accused this week of "misleading" people by stating it could help people wriggle out of their debts. The Advertising Standards Authority upheld a complaint from Lloyds TSB about adverts from a firm called Debt Free.
The problem ads claimed: "If your credit card or loan was taken out before April 2007 it could be completely UNENFORCEABLE AND WILL NOT NEED TO BE REPAID [their capital letters]. Our solicitors can use government legislation to arrange for your outstanding balances to be written off and claim compensation for you."
But the ASA ruled that the statement "was likely to mislead readers as to the likelihood of their debts being written off". It also upheld a complaint that the firm's ads failed to make clear the cost of using the service. The company says it refunds people's fees – minus a £50 administration charge – if it can't help them write off their debts.
Now, putting aside for a moment the moral argument behind this, the fact is that companies like Debt Free can make a pretty penny just by encouraging everyone to use their service, whether or not they have any chance of being successful. They just need to collect administration charges from 20,000 people to pocket £1m, for instance.
Their ads are seductive and persuasive – after all, who wouldn't jump at the chance of clearing their debts? There's also an element of sticking one to the banks by getting out of a loan or credit card debt. But underlying it is the fact that these companies are jumping on a bandwagon that is encouraging people to weasel out of their financial obligations.
The concept of unenforceable loan agreements is based on the fact that some loan contracts may not be worded exactly right under the terms of the 1974 Consumer Credit Act. There's no question of people being mis-sold loans or credit cards, just that a legal loophole may make their credit agreement harder to enforce.
As such, this has nothing to do with consumer compensation or wrongdoing by lenders and all to do with people being encouraged to find a sneaky way to avoid paying their bills. When anyone takes out a loan, they know they have to repay it. Trying to find a way to get out of the debt strikes me as being morally repugnant.
The number of these companies seems to be growing as they see a chance to make some easy money, but their claims of being consumer champions or fighting for compensation are bogus. The Ministry of Justice has already warned about these firms, but it needs to take firmer action to curb their activities. Until it does so, they will be free to carry on preying on the hopes of the hard-up.
*By the way, a directory of mobile phone numbers goes live next week, meaning your mobile number will be easily available to anyone, including those annoying cold-calling firms. However, you can get your number removed from the directory by going to: www.118800.co.uk/removeme/remove-me.html