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Should trust deed advisors be regulated more closely?

4th November 2010

In our recent Trust Deed survey we asked visitors to this website the following question:

“Do you believe that companies providing debt advice or trust deed advice should be more heavily regulated than they are today?”

Of those who expressed a definite opinion, a staggering 94% said they thought more regulation was necessary.

In this article we analyse the underlying reasons behind the strong feelings expressed by our survey participants. We also offer some suggestions to help people to avoid the risks associated with receiving poor advice about trust deeds in Scotland from ill-equipped advisers.

Trust Deed Regulation

A protected trust deed is a personal appointment taken on by an insolvency practitioner; who, even though they may work for an accountancy or insolvency company, also has personal responsibility for the case.

Insolvency practitioners are members of professional bodies who also serve as their regulators. Regulation of standards is thorough, strict and taken extremely seriously by the individuals themselves and their teams.

Many insolvency practitioners in Scotland are members of the Institute of Chartered Accountants of Scotland (ICAS), who issue insolvency permits to suitably qualified members. Particular focus is placed upon compliance with insolvency law and the proper handling of client funds.

The trust deed survey did raise some concerns about the service standards of some insolvency and trust deed companies, but in terms of professional standards of conduct, this is the most substantially regulated area of debt advice and debt solutions.

We therefore advise readers, that while they can feel confident strong regulation remains in place for those who directly provide trust deeds, caution should be exercised in finding a company which is also committed to providing a high level of service to their clients.

Debt Management and Debt Advice Regulation

Debt advisers (who may work individually, or on behalf of a licensed company) are required to hold a Consumer Credit Licence which is issued by the Office of Fair Trading.

Debt advice and trust deed advice is now considered to be a “high-risk” area by the OFT and anyone applying for a CCL must follow a strict application process which will check, amongst other things, that they have sufficient competence to provide debt advice.

Many thousands of CCL’s were issued prior to it being declared a “high-risk” activity, so no competency checks were carried out in this time. As such there are a huge number of individuals and companies licensed to provide debt advice who do not have the competence to be able to properly advise clients. Not all of these people and companies will be actively trading in debt advice, but some certainly are.

Commercial debt management and debt advice companies are required to adhere to the “debt management guidance” issued by the Office of Fair Trading. In particular this focuses on the accuracy and quality of advertising, websites and other promotional materials.

A recent investigation into commercial debt advisers by the Office of Fair Trading revealed inaccurate websites and poorly trained debt advisers as major issues within a large number of companies. 129 debt advice companies have received notices that their standards must improve or their permission to trade, via their consumer credit licence, will be removed.

The OFT appear determined to improve standards and it is clear that a cleansing process is well underway to rid the market of incompetent and dishonest debt and trust deed advisers. However, this process remains at a relatively early stage and consumers should continue to exercise caution when choosing a source of assistance.

General Advertising Regulation

The Advertising Standards Authority requires advertisers to be fair in the way they promote their services or products. There have been instances where excessive claims made by debt advice companies have been investigated. This includes claims such as, “a protected trust deed can lead to 90% of your debts being written off” when in fact this will only be the case for a very limited number of individuals (many people will end up repaying more of their debts if they have the means to do so).

As mentioned previously the OFT also manages the advertising of trust deeds via their “debt management guidance”. This requires that a balanced picture is provided so any individual making a decision regarding their options has accurate information available, which is presented to them in a clear and concise way.

Regulation of Trust Deed Websites

The regulation of trust deed websites is in the hands of the OFT who have discovered significant problems with a large number of debt advice websites.

Some of the problems are identified in the previous news article which focussed on the subject of trust deed websites.

Standards are expected to improve in the coming months; we currently advise readers that information obtained from trust deed websites should be verified carefully before relying upon it.

The next article based upon the trust deed survey results will look into the qualifications required to become a trust deed or debt adviser.

For further Trust Deed news and information, please visit our forum where we have a wealth of free advice from experienced industry experts.

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