Consumers have been warned not to be taken in by firms which claim they can use a legal loophole to get their debts written off.
The Office of Fair Trading (OFT) warned people against using companies that misleadingly promised consumers they could use sections of the Consumer Credit Act to wipe out their debts.
The firms offer to "buy" consumers' debts from them, claiming they can get them written off, but charge people an "administration fee", often of several hundred pounds.
The scam relates to Sections 77, 78 and 79 of the Consumer Credit Act, under which consumers can request a copy of their credit or hire agreement. If the lender fails to provide the requested information, the debt becomes unenforceable, meaning the lender cannot get a court judgment against the borrower, take back hired items or things bought on credit or anything that was used as a security, such as a car.
But the OFT, which has produced a consumer guide on the issue, warned that even if the debt was unenforceable, people would still owe any outstanding money to the lender. The lender could also continue to add interest to the loan or hire agreement, as well as default charges, while consumers' credit records could also be impacted if they did not repay the money.
The OFT also warned that the debt became enforceable again as soon as the lender produced a copy of the credit agreement.
The High Court recently ruled that for a debt to be enforceable, lenders did not have to produce the original credit agreement or a photocopy of it. Instead it said a reconstituted version was acceptable, as long as it was accurate and contained all of the original information.
The OFT added that consumers could not sell their debts, as they belonged to the lender, not the individual.
Ray Watson, director of the OFT's consumer credit group, said: "Consumers have a right to information on debts they owe, but it is important that they realise that these sections of the Act cannot be used to write off legitimately owed debts.
"Although the debt can be classified as unenforceable until the right paperwork is provided, people are encouraged to seek advice and help on how they can continue to repay the money they owe. Consumers can get free advice on debt by contacting Citizens Advice or the Consumer Credit Counselling Service."