ASA Adjudication on Debt Advice Trust

Ad

a. A national press ad for Debt Advice Trust was headed "You're not alone." Body copy stated "A not for profit organisation - If you owe more than £15,000 and either you or your partner is in work then speak to the Debt Advice Trust. We're an independent, not for profit organisation that gives free support and guidance to people in serious debt. So you can be confident of receiving the very best advice. Our recommended solutions are provided by carefully vetted companies best suited to solve your debt problem ... Call us today on 0800 XXX XXXX." A footnote stated "The Debt Advice Trust is a not for profit organisation funded by various solutions providers approved by the Trust. Its vision is to become the most trusted, respected and widely used source of help and advice for people struggling with serious debt problems."

b. A second national press ad was headed "Debt problem? Here's a helping hand." Body copy and a footnote continued as in ad (a).

Issue

A member of the public and ClearDebt Group plc (ClearDebt) challenged whether Debt Advice Trust was

1.  a not for profit organisation; and

2.  independent.

3.  ClearDebt also challenged the claims "Our recommended solutions are provided by carefully vetted companies best suited to solve your debt problems"; and

4.  "The Debt Advice Trust is a not for profit organisation funded by various solutions providers approved by the Trust."

CAP Code

Response

1. & 4.  Debt Advice Trust (DAT) said they were a not for profit company, limited by guarantee, set up to offer free, impartial advice to people with debt problems. They said that, with the exception of one referee that was a registered charity, DAT referred enquirers to organisations that agreed to make donations to or sponsor DAT.  They said all profits were gifted to the Debt Advice Foundation, a registered charity founded in 2003 and currently working towards running education programmes for school children regarding how to manage finances and avoid debt.

DAT said the company Debt Free Direct provided premises and staff for DAT and would continue to do so until DAT was self-sufficient.

2.  DAT said the advice they gave was based on the particular circumstances of each individual caller and that neither Debt Free Direct nor any other provider had any say in the solutions DAT recommended.  They said all income and expenditure was maintained and accounted for separately from that of Debt Free Direct.  All those to whom referrals were made had to agree in advance to make a payment to DAT.

3.  DAT said they referred enquirers to one of several companies, all of whom had been chosen because they were considered to act honestly, ethically and in the customer's best interests, depending on the type and severity of the debt problem they had.  They said in the case of Individual Voluntary Arrangements (IVAs), which represented 41.5% of advice outcomes in the nine months to September 2007, customers were only referred to companies who had taken an independent audit by an international firm of auditors to prove that they operated ethically. They said Debt Free Direct was the only provider to have paid for and taken the audit.  They said that in the case of Debt Management Plans (DMPs), which represented 28.5% of advice outcomes in the same period, the provider they referred customers to, Payplan, was unusual in not charging customers a fee to set up a DMP.

DAT said the ads were no longer running.

Assessment

1. & 4.  Upheld

The ASA noted that the words "not for profit" appeared four times in ad (a) and three times in ad (b) and considered the word "Trust" emphasised the organisation's not for profit nature.  We noted that DAT was incorporated as a company limited by guarantee on 30 April 2007 and whose Memorandum of Association precluded the distribution of profit or payment to directors and required that on winding up any surplus assets needed to be applied to another charitable institution with similar objects.  We noted that DAT's profits were gifted to the Debt Advice Foundation, a registered charity whose last published accounts, for 2006, revealed no expenditure.  We noted that two of DAT's directors were trustees of the Debt Advice Foundation. We also noted that DAT's three directors were also the three executive directors of Debt Free Direct plc, now Fairpoint Group plc, a commercial company whose principal activity was also the provision of financial advice and appropriate solutions to individuals experiencing personal debt problems.  We understood the company had a turnover of £28M in the year to 30 April 2007.  In addition to the proportion of referrals to Debt Free Direct, we noted that re-mortgage referrals were made to DFD Mortgages, a subsidiary of Debt Free Direct.  We considered that in context "not for profit" suggested DAT had no financial interest in the advice they gave and the solutions they recommended, whereas their links with Debt Free Direct's staff, knowledge, premises, directorships and shareholdings and the support they expected from those to whom enquirers might be referred did not support that.

2.  Upheld

We noted DAT's point that neither Debt Free Direct nor any other provider had a direct say in the solutions DAT recommended.  We considered, however, the ad suggested the support and guidance DAT offered was completely free of any provider interest when, for the reasons outlined in point 1 above, we considered the close links with Debt Free Direct meant that was not the case.

3.  Upheld

We noted the safeguards DAT had in place to ensure the solutions they recommended were the ones best suited to their enquirers but considered that, particularly in the case of IVAs, the vetting was confined to such a narrow list as to make this claim misleading.

On points 1, 2, 3 and 4 the ads breached CAP Code clauses 3.1 (Substantiation) and 7.1 (Truthfulness).

Action

We noted that the ads were no longer running but nevertheless told DAT not to repeat the claims "a not for profit organisation", "independent", "our recommended solutions are provided by carefully vetted companies best suited to solve your debt problems" and "a not for profit organisation funded by various solutions providers approved by the Trust" in future similar ads.

Adjudication of the ASA Council (Non-broadcast)