A type of scam that promises to write off mortgage debt is currently targeting UK consumers, the FCA has warned.

The regulator believes there are currently firms offering unauthorised claims management services to people in the UK, which say they can write off debts but often charge fees to do so, even when the scheme fails.

Under the scam, firms offer to ‘write off’ debts, mainly mortgages, and get compensation for consumers from their lenders. This might include reclaiming past payments of capital and interest. The FCA warned that firms often charge a fee to do this and might add more fees even when the scheme fails, which can lead to significant losses for those involved.

According to the FCA, the firms might try to convince individuals by pointing to ideas such as ‘Strawman’, ‘Freeman of the Land’ and ‘Sovereign Citizen’ – ideas promoting the belief that the government and laws of a country have no powers over people.  

“Fraudsters use these ideas to appeal to people facing financial difficulties who may be looking for a way out of their debt,” an FCA statement said.

“Individuals should be cautious of any firms offering to write-off debt. These scams often increase in times of economic hardship and can involve vulnerable victims who are already struggling with money.”

Almost all firms and individuals offering, promoting or selling claims management services in the UK must be authorised or registered by the FCA. 

If an individual uses an unauthorised firm, they will not have access to the Financial Ombudsman Service if they have a complaint. They also will not be protected by the Financial Services Compensation Scheme (FSCS) if things go wrong, meaning it is unlikely they would get their money back if the firm fails. 

“If you stop making repayments on your debts, you could also face action from your lender,” the FCA stated. “This could include debt recovery and repossession of your home.

“If a financial firm is authorised or registered it gives you greater protection if things go wrong. Check the Financial Services (FS) Register to make sure the firm is authorised and has permission for the service it’s offering you.

If you’ve been contacted unexpectedly by a business or individual, make sure you call them back using the contact details on the FS Register.”

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