ASA Adjudication on The Debt People Ltd

Ad

A TV ad, for the Debt People Ltd, claimed "using Government legislation we could freeze the interest and write off up to 75% of what you can’t afford to pay". On-screen text at various points in the ad stated "An IVA should only be considered in extreme circumstances. It is a formal legal agreement supervised by an insolvency practitioner. Failure to adhere to an IVA could result in bankruptcy. Your credit rating may be affected ... Write off up to 75% ... Subject to conditions, circumstance & acceptance. Not available in Scotland".

Issue

Debt Free Direct Ltd challenged:

1. whether the claim "we could freeze the interest and write off up to 75% of what you cant afford to pay" was misleading and could be substantiated, because they believed the claim exaggerated the amount that most consumers were likely to be able to write off and

2. whether the ad was misleading, because it did not make clear the fees payable under the terms of an Individual Voluntary Arrangement (IVA).

BCAP TV Code

Response

1. The Debt People Ltd (The Debt People) said they had removed the claim from their ads. They said that, in a significant number of the arrangements approved since the ad was broadcast, clients had been able to write off 75% of their debt and an even greater number had been able to write off between 60% and 74% of their debt. They did not send evidence in support of the claim, but pointed out that 75% was achievable in principle and that the claim was qualified by the text "up to", which made clear that not everyone could expect to write off the amount quoted.

The Broadcast Advertising Clearance Centre (BACC) said they had been assured that some clients could expect to write off 75% or more of their debt.

2. The Debt People said they did not charge for debt advice. They said clients were made aware of all the costs involved in an IVA, including fees, before they entered the arrangement and that they would be informed how much of their debt would be written off and what proportion of their payments would go towards paying off fees by the Insolvency Practitioner who made that arrangement. They said that fees were collected from the debtor and held in a trust account on behalf of the creditors, who permitted The Debt People to deduct fees from those funds before distributing the balance to creditors. They argued that meant the debtor was not responsible for paying fees.

The BACC said they had been assured that The Debt People gave free advice.

Assessment

1. & 2. Upheld

The ASA noted The Debt People's comments. We noted that The Debt People had based the claim "write off up to 75% of what you cant afford to pay" on a dividend of 25p in the pound. However, we noted that, while debtors were not charged upfront fees for an IVA, the incorporated fees were added to the dividend paid to creditors and debtors would pay a larger amount than the 25% payable to creditors. We noted that fees were administered by The Debt People but that they were paid for by debtors. We understood that, even taking fees into account, a small number of debtors might still be able to write off 75% of their debt but considered that, because we had not seen evidence that demonstrated a significant proportion of consumers could do so, the ad exaggerated the benefits of an IVA. We concluded that the ad was misleading.

The ad breached CAP (Broadcast) TV Advertising Standards Code rules 5.1 (Misleading advertising), 5.2.1 (Evidence), 5.2.2 (Implications) and 5.2.3 (Qualifications).

Action

We welcomed The Debt People's decision to remove the claim from future ads. We told them to ensure that future similar claims were based on an amount of debt that a significant proportion of consumers could expect to write off, taking into account the impact of fees.

Adjudication of the ASA Council (Broadcast)