Claims management companies (CMCs) have been dismissed by consumer champion Which? as a poor way for Britons to lower their debt levels.
CMCs offer debtors the chance to discount outstanding debt on credit cards and loans using legal loopholes in the Consumer Credit Act, under which certain terms must be fulfilled otherwise the agreement is unenforceable.
Which? Lawyer Chris Warner agreed with the recent decision from the Ministry of Justice to restrict the operation of CMCs as they were misleading the public relating to loan repayments.
Mr Warner said: “Which? believes consumers should not stop payments on their loan just because the lender cannot provide them with a copy.”
The organisation has also remarked in the past that claiming agreements are not enforceable “is not a sensible way” to deal with debt.
Earlier this month, it was found that a greater number of elderly borrowers are opting for equity release to reduce their arrears than ever before, with 36 per cent using such methods to pay back debts in the previous quarter.
By Sarah Adie