Consumers have been warned to disregard misleading adverts stating you can write off debt using loopholes in legislation.

The Office of Fair Trading, which today issued draft guidance on the matter, states consumers should pay loan and credit card debts they legitimately build up rather than trying to wriggle out of them.

The guidance comes after a landmark High Court test case in December that virtually closed off the major debt avoidance loophole (see the Debt loophole closed MSE News story).

The Court stated that when asked by a borrower for a copy of the original agreement, lenders only have to supply the correct information, not an exact copy of the original.

Many claims management companies had previously told borrowers that their debt could be written off if an exact copy is not produced.

Some claims firms charge up to 500 per card or loan they "review" as an upfront fee, which you should never pay.

Ray Watson, OFT director of consumer credit, says: "There has been a great deal of confusion over the meaning of these sections (of the Consumer Credit Act) with many borrowers misled into thinking they can get debt written off.

"This guidance is to clarify the legal position and make consumers aware they may be at risk if they seek to use these sections to avoid paying legitimately owed debts."

Even if a lender cannot produce the terms of the agreement, which is now a straightforward process even if it's lost the original, the debt is only technically unenforceable until it provides a copy.

'Unenforceable' means a lender can still chase a borrower for payments and register non-payment with credit reference agencies, but it cannot use the courts to enforce the debt.

Claims firms suggest there may be other avenues to avoiding debt but there has been extremely limited evidence of any of these working.

A consultation process, which ends on 21 April, will help determine the final guidance.

Further reading/Key links

Debt help: Write off your debts?, Debt Problems