The Trust’s policy manager Meg van Rooyen highlights the issue of lead generation companies masquerading as free debt advice charities and what can be done to address the problem.
It is not just Martin Lewis having a problem with fake advertising.
If you try looking for free debt advice through an online search engine like Google, you will be lucky to find National Debtline, StepChange Debt Charity or Citizens Advice at the top of your search results. There are many companies out there using paid advertisements to give the misleading impression that they offer debt advice or to masquerade as free debt advice charities.
“Get expert debt help today”. “Debt line help”.
“See if you can have 86% wiped off.”
“Step to change debt management.”
“Government debt write off UK.”
Even a search for the Money Advice Service brings up an advert inviting you to “wipe out your debts today” and “find out within 2 minutes if you can write off up to 90% of your debts!”
People may be more susceptible to this type of messaging, which offers a quick solution to their debt issues, but it may lead them down a debt route unsuitable for their situation. When using an online search, it is crucial that the information people receive is accurate and unbiased.
A quick search on Google suggests this is currently not the case.
People should be able to find sources of free, impartial and technically accurate debt advice. We believe that lead generation companies and fee-charging debt management firms are paying for adverts on search engines, like Google, in the hope that people in debt will be persuaded to click on these links instead of a source of reputable, free debt advice. Such companies have a commercial interest in leading people towards particular debt solutions. Lead generation companies sell such leads to insolvency practitioners and other debt management companies in return for a large fee.
People may be getting poor quality or non-existent debt advice from these companies. What is unclear is who is setting the requirements on these lead generation firms or policing any standards in relation to the quality of debt advice they provide.
Whilst charities can challenge companies who masquerade as them, which we do on a regular basis, it is costly and time consuming to police the internet and social media (as Martin Lewis has found out in his discussions with Facebook). There needs to be a better solution.
What are the current rules?
The Financial Conduct Authority (FCA) regulates debt management companies and the Insolvency Service regulates insolvency practitioners (IPs). Lead generation companies, which appear to be one of the main causes of issues, can fall into a regulatory gap between the two.
The FCA sets out the rules for debt counselling and debt adjusting firms in relation to financial promotions and communications (CONC rule 3.9.7). These rules state:
A firm must not:
(1) unless it is a not-for-profit debt advice body or a person who will provide such services, operate a look alike website designed to attract customers seeking free, charitable, not-for-profit or governmental or local governmental debt advice; or
(2) seek to use internet search tools or search engines so as to mislead a customer into visiting its website when the customer is seeking free, charitable, not-for-profit or governmental or local governmental debt advice.
And while the FCA has guidance which covers paid search marketing ads, these apply to debt management companies and not lead generators.
Responsibility for the actions of lead generation firms lies with the authorised debt management companies that use them.
Similarly, Insolvency Practitioners can avoid requiring FCA authorisation if they are acting in ‘expectation’ of an appointment.
With lead generators unregulated and insolvency practitioners falling outside of the FCA’s rules in this area, who is checking that clients are receiving the regulated debt advce they need? And how can the people going through this route be confident that they have the right debt option for their individual set of circumstances?
What needs to be done?
We want to see fundamental reforms put in place so that lead generators cannot:
- state they offer ‘debt advice’, unless they are authorised to do so;
- make overly positive or misleading claims about the solutions on offer, which could include promises about the ease, speed, terms or relative benefits of a solution;
- seek to pass themselves off as being a charity or providing government-supported advice.
Much of this requires action from regulatory bodies. The FCA, Insolvency Service, the debt management and insolvency sectors need to work together. To start with, the Insolvency Service could develop stronger rules for insolvency practitioners who accept referrals from lead generation companies. This would need to ensure that if people are going down this debt solution route, it is because it is the most suitable option for them.
The FCA also has a role to play. The regulator could look at the actions of authorised debt management companies and whether they are accepting leads from lead generators that may be breaking their consumer credit rules.
Ultimately, the government needs to take action to close the ‘regulatory gap’ in which the lead generation industry operates. We believe that government should give the responsibility to the FCA to regulate the activities of lead generators in relation to debt advice, through the creation of a new regulated activity of “effecting introductions to debt advice”.
Either way, more action is needed to prevent people in debt being lead down a debt option that is not right for their situation. We look forward to continuing to work with partners in the sector to address these issues.