Consumers will be faced with fewer dodgy debt management firms after 50 either voluntarily quit the sector or are set to be expelled.

This follows an investigation by the Office of Fair Trading (OFT) after it warned 129 firms last September of action due to widespread abuses (see the Debt Problems guide).

Some 35 firms have surrendered their consumer credit licences following OFT pressure and 15 more face what the watchdog calls 'licensing action'.

Of those, eight will have their licences revoked and seven did not respond so face investigation and are also likely to have licences revoked. They all have a right to appeal.

A further 79 companies have submitted evidence, which the OFT will now review, with more punishment set to be handed out to failing firms.

Unscrupulous companies typically charge high fees and sometimes push borrowers into extra debt by selling unsuitable products.

The independent Financial Ombudsman Service, which arbitrates between consumers and financial firms, typically upholds 60% of complaints against debt management companies.

The OFT found many debt firms offered misleading advertising particularly in failing to disclose fees.

Consumers are not always told some of the money they think is going to pay off debts actually goes to the debt firm in admin fees.

The watchdog also discovered many frontline advisers offer poor advice due to incompetence.

Ray Watson, from the OFT, says: "We are determined to improve standards in this sector as the failings are unacceptable.

"Companies providing debt management services should be in no doubt we will act against bad practice and ensure consumers are protected."

Miscreants should not be confused with debt charities which are fee-free and offer good, impartial advice.

Further reading/Key links

Get help: Debt Problems, Mortgage arrears and Redundancy guides