clampdown on firms which promise to help struggling borrowers repay debts could lead to unscrupulous companies being banned.
The Office of Fair Trading is launching a probe into debt management firms following fears that consumers who are already in distress are being left worse off. Misleading advertising and poor advice can result in borrowers signing up to costly and inappropriate plans.
There are about 150 debt management companies which claim to put borrowers with several debts on to repayment plans. They negotiate with debt collectors and credit firms to get interest payments frozen and repayments lowered.
However, some firms falsely claim to be charities or government-backed. Others have made unlawful, unsolicited calls and sent mailings about repayment plans to customers already laden with debt.
The companies make their money from commission paid by credit firms. However, many also sell insurance alongside the debts.
In particular, the OFT will probe online advertising.