Misleading' legal debt loophole

A 'legal loophole' being used by firms who are telling customers they can "write off their debts" is misleading, the Office of Fair Trading (OFT) has said.

The OFT warned people not to be taken in by the firms who offer to "buy" customers' debts - for a fee of around several hundred pounds - and claim they could use sections of the Consumer Credit Act to get them written off.

Using sections 77, 78 and 79 of the Consumer Credit Act - under which consumers can request a copy of their credit or hire agreement - the companies claim the debt becomes unenforceable if the lender fails to provide the agreement.

This means that the lender can not obtain a court order or judgement against the borrower, and cannot take back hired items or things bought on credit.

However, the OFT has become concerned about the scam, and has warned consumers that even if the debt was unenforceable, people would still owe money to the lender. The lender could add interest to the loan or hire agreement, as well as other charges - including default charges - so money would still have to be repaid.

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