18 February 2021: The Insolvency Service has reminded practitioners working with outside parties on the provision of individual voluntary arrangements to be alert for unethical advertising aimed at individuals struggling with debts.

Two recent rulings by the Advertising Standards Agency (ASA) upheld complaints made by the Money and Pensions Service over debt relief services advertised online via search and websites.

“Any insolvency practitioners using those firms, who use lead generators or debt packagers whose advertising may be considered misleading, should consider the implications of those rulings, and take appropriate action to ensure compliance with the Insolvency Code of Ethics and advertising standards,” the Insolvency Service said.

There are strict rules on who can provide debt advice, with entities requiring authorisation from the Financial Conduct Authority (FCA), or if they are an insolvency practitioner, to only be acting in contemplation of an insolvency appointment.

ICAEW experts said organisations providing Individual Voluntary Arrangements (IVA), which are a regulated debt solution as an alternative to bankruptcy, are under scrutiny regarding their lead generation, given the current sensitivities stemming from the COVID-19 economic downturn.

Watchdogs are concerned some debtors may have already come through unregulated advisers and so may not have had proper advice or may have entered into an IVA based on advice from an unregulated party.

The first ad, by National Direct Service, misleadingly suggested it was linked to both a charity and the government, and used five-star reviews in its marketing that could not be substantiated. It also claimed to be a free service, which was not accurate. 

The second ad, for Fidelitas Group Ltd, carried a misleading Trustpilot rating, did not disclose the risks involved and the ASA said it was clear that the service was not provided by the advertiser and that details were passed on to a third party.

The government agency said insolvency practitioners must consider their obligations under the Insolvency Code of Ethics when considering taking a new appointment. This covers advertisements, marketing and also responsibilities for advertising by introducers, debt packagers and lead generators.

Practitioners themselves will be held liable for compliance breaches if they have not vetted a third party appointed to generate leads or conduct marketing activities, the Insolvency Service said. 

Regulators are also trained to spot misleading advertising which targets consumers in debt when conducting monitoring visits. Insolvency practitioners must be able to demonstrate that any promotional activity they have undertaken is fair and not misleading, avoids unsubstantiated or disparaging statements, complies with the relevant codes of practice and guidance for advertising, and is truthful, honest and clearly distinguishable as advertising. This also extends to marketing carried out by third parties who refer work to them

The Insolvency Service said any breaches of the ethical code and/or advertising standards were considered serious matters and it would continue to refer any potential misconduct to the ASA, Financial Conduct Authority (FCA) and the regulators such as the ICAEW.

“It is extremely disappointing that similar advertisements, including seemingly impersonating debt advice charities, continue to be found online,” the government agency said. “The insolvency regulators, the FCA and the ASA are also aware of similar advertising campaigns targeting the users of social media sites and any instances will be reported to relevant regulators for action.”

Further resources

• Insolvency Code of Ethics
• Guidance on monitoring insolvency practitioners: Advertisements, marketing and debt advice

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