The Advertising Standards Authority (ASA) has published two rulings that have banned misleading adverts by two commercial debt advice firms.

The rulings involve commercial debt advice companies, National Direct Service and Fidelitas Group who the ASA says made various misleading claims, in paid-for search ads and on their websites, about their services. An investigation was launched following a complaint by the Money and Pensions Service (MaPS), with the support of the charity debt advice sector, after it conducted a review of online advertising practices of the commercial debt advice and solutions providers.

The Money and Pensions Service worked with several free-to-client debt advice services to gather evidence and submit a range of complaints to the Advertising Standards Authority. These complaints related to commercial firms’ advertising practices targeting people searching for debt advice.

Free and impartial debt advice is widely available online, but the top positions in search engine results for debt-related terms are dominated by commercial, profit-making advertisers who have paid to rank at the top. A significant proportion of people searching for a named debt charity are instead being diverted to commercial companies using pay-per-click (PPC) advertising.

MaPS raised these complaints to the ASA due to the growing body of evidence of client detriment. Specifically, clients who have established a relationship with a commercial organisation mistakenly believing it was a debt charity, clients who have entered into a repayment debt solution that is not sustainable and clients who have paid unnecessary fees to commercial firms. A valuable resource within genuine debt charities was increasingly being diverted away from advice-giving into dealing with queries and complaints as a result of ‘copy-cat’ commercial firms.

Commenting on the rulings, ASA Director of Complaints and Investigations, Miles Lockwood said “The misleading ads by these commercial debt advice firms are unacceptable at any time but given the current economic downturn, with lots of people throughout the UK under significant financial pressure or stress, it is especially important that we tackle ads of this nature wherever they appear. No-one seeking free help and advice with debt should be hoodwinked by an ad into thinking they’re using a genuine debt advice charity when that is not the case.”

‘We welcome the Money and Pensions Service working with us to identify bad ads in this sector. We have some ongoing investigations involving other commercial debt advice firms, the outcomes of which we’ll publish soon, and we’ll continue to take action where consumers are being treated unfairly and misled.”

Commenting on the ruling, Caroline Siarkiewicz, Chief Executive of the Money and Pensions Service said “The Advertising Standards Authority’s (ASA) rulings on the practices of some commercial firms are a positive and welcome development for people struggling with debt, as well as the free debt advice sector which supports these customers.”

“Some of the practices deployed by these commercial firms were concerning. For instance, many implied a misleading association with genuine debt advice charities, leading some customers to take up services unknowingly from a commercial organisation when they had been searching for free advice. Other claims made by some firms had the potential to get people to ask for a debt solution that may not be suitable for their circumstances and in some cases require them to pay unnecessary fees.”

“The ASA decision has come at a crucial time. This month we anticipate a call about debt every four minutes to the Money Advice Service helpline, and we expect the demand for debt advice to increase over the next 12 to 18 months due to the financial impact of the Covid-19 pandemic. Many people will need support for the first time but also may not know where to begin.”

“Just as a doctor reviews a patient’s circumstances in the round before recommending treatment, free debt advisors assess a person’s situation holistically before recommending a debt solution. There are lots of ways out of problem debt. However, many of these commercial firms specialise in providing just one kind of debt solution and cannot advise on the whole range of options available.’

“Free debt advice can be life-changing for people in difficulty. Our research shows that 63% of customers with debts are reducing or clearing them within 3-6 months after receiving impartial debt advice.”

Debt charity, StepChange has also welcomed the decision by the ASA. One of these advertisers, National Direct Service trading as Step Debt Support, was specifically upheld to have misled consumers by purporting to be associated with StepChange Debt Charity, among other misleading statements.

The decisions to uphold the complaints in full confirm what StepChange has been highlighting for several years: that misleading advertising by lead generators is putting people at risk of being pushed towards potentially inappropriate debt solutions. In the wake of Covid-19, as more people are experiencing financial pressure, it is more important than ever to ensure that consumers are not misled about debt advice and solutions.

StepChange says today’s ASA decisions represent just the tip of the iceberg in terms of how people are misled. The charity has identified at least ten websites associated with the two advertisers on which the ASA has ruled, and there have been numerous other examples of charity impersonation not associated with these particular advertisers. In the first few weeks of 2021 alone, the charity has already reported eight cases of trademark infringement to internet search engines, and two cases of advertisers in breach of their advertising policies.

The charity has also received many first-hand reports from people who have been contacted by telephone or email from organisations claiming to be StepChange, or claiming to have had people’s details passed on to them by StepChange, which have been gained through misleading advertising on social media platforms and internet search engines. Sometimes, people do not realise that the organisation they have been dealing with is not the charity until they contact StepChange with a query.

The ASA decisions helpfully give a clear signal to other advertisers about misleading practices that are widespread but unacceptable. However, they are sadly unable to solve the underlying drivers that cause such misleading advertising to exist in the first place. While the ASA can tackle misleading advertising when it occurs, action also needs to be taken by the regulators of the financial and insolvency sectors to deal with the problems at source.

The problems are particularly acute around Individual Voluntary Arrangements (IVAs), as a result of the commercial fee incentives that exist in this market, which can be poorly aligned with consumer interests. While IVAs can be a very good solution for some people (and StepChange recommends them to some clients), they can be high risk and expensive if they fail, so it is imperative that they are not mis-sold.

StepChange believes that regulatory reform is needed to deal with these misleading practices. First, there is a need to bring lead generators for debt solutions inside the scope of FCA regulation. In addition, there is a need to improve the IVA market to improve the alignment between commercial incentives and consumer interests.

While StepChange recognises that the Insolvency Service and the Recognised Professional Bodies for Insolvency Practitioners are both seeking to make improvements, the fact that these problems have become so entrenched for so long suggests a need for firmer action.

Richard Lane, Director of External Affairs at StepChange Debt Charity, said “People who need help with their debts need advice, not a hard sell. It’s clear that there’s a need for better protection to prevent people being hoodwinked into thinking they are dealing with a debt advice charity, when in fact they are simply being lured to provide their personal details to lead generators working on behalf of commercial IVA factories.”

“The ASA has confirmed what we already knew: there is a lot of misleading advertising out there, including from outfits impersonating legitimate debt advice organisations. Along with the FCA’s warnings about clone firms impersonating debt advice charities like us, this confirmation is helpful, but it cannot be the end of the story.”

“What matters now is that there is more decisive action taken by regulators to tighten up the oversight of how firms who provide IVAs acquire their customers so that people get better advice about all their possible options for dealing with debt before making a premature decision, especially one that may be based on unethical practices or false pretenses.”

Jane Tully, Director of External Affairs at the Money Advice Trust, said“Today’s decision from the Advertising Standards Authority to take action against these lead generation firms is welcome and recognition of the risk these misleading adverts pose to people in debt.”

“Action like this to stop misleading adverts appearing online is needed, however as one advert is taken down another often appears.  Our concern is that these adverts direct people in need of debt advice down routes that may not be suitable for their circumstances, causing further financial harm down the line.”

“At a time when the financial impact of Covid-19 continues to be felt, these adverts pose a serious risk to the longer-term financial recovery of many people in debt.”

“The Government needs to step in and to give the FCA the power it needs to tackle this issue head on.”