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Loan debt promises 'misleading'

Published: 16/10/2009

New criticism has been leveled at UK Claims Management Companies (CMCs).

A report commissioned by the British Bankers' Association (BBA) and released today (October 16th) suggested that "too many" of the firms were misleading customers with their promotional material.

The study saw researchers conduct a "mystery shop" of claims handlers who say they can use legal loopholes to cancel personal loan and credit card agreements.

Some firms were found to be specifically targeting customers with promises of compensation - and were found not to be highlighting the potential drawbacks of disputing debts, such as the lowering of credit ratings.

This finding is particularly relevant following the High Court decision earlier this month that banks could still report non-payment of debts to credit ratings agencies even though the debts themselves were being disputed via a CMC.

Other failings found within the sector included misleading "no win, no fee" promises, "unsubstantiated success rates" and incorrect advice.

Eric Leenders, executive director for retail banking at the BBA, said: "Consumers should be free to take professional advice to help them, but what was once a legal service is now becoming a mass-market industry and that brings with it some significant and fundamental quality control problems. If customers feel they need help progressing a complaint, they can find real help from reputable and reliable sources."

He added: "The best advice is, as always, that if something sounds too good to be true, it probably is."

CMCs commonly demand up-front fees of several hundred pounds to customers who want to dispute debts.

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