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Debt management companies exploit the vulnerable, says charity

Citizens Advice calls for tougher regulator action

Man in debt solution with bills

Citizens Advice finds debt management companies charging excessive fees, offering vulnerable people inappropriate debt solutions and forcing people further into debt

A substantial number of fee-charging debt management companies are exploiting vulnerable consumers, according to Citizens Advice.

The charity is calling on the regulator to impose tougher sanctions on companies that flout the rules. Citizens Advice Bureaux helped with over 3,000 problems relating to rogue debt management services and credit repair in the last year.

Citizens Advice reports fee-charging debt management companies charging excessive fees, offering vulnerable people inappropriate debt solutions and forcing people further into debt.

OFT debt management guidance

In Citizens Advice’s response to the Office of Fair Trading’s consultation on debt management and credit repair services guidance, chief executive Gillian Guy said: ‘People already struggling with their finances, trying to do the right thing and address their debt problems, should not be pushed over the brink by unaffordable fees or inappropriate services.

‘These guidelines from the OFT set high standards for the debt management and credit repair industry. However, guidelines alone are not enough. In the past debt management companies have routinely flouted the OFT’s guidelines, so these will need robust enforcement. The regulator must not be afraid to impose tough sanctions where the guidelines are ignored and to revoke the credit licenses of repeat offenders.

‘As the Government reviews the future of consumer credit regulation, Ed Davey needs to make sure that consumers can count on a regulator with the right powers and political clout to deter bad practice and aggressively tackle firms, which treat customers unfairly.’

Avoid commercial debt management companies altogether

Which? debt expert Martyn Saville added: ‘Our past research, along with the OFT’s own mystery shopping, has found a litany of problems in the commercial debt management sector. Whether it’s poor advice, high fees, potentially inappropriate cross-selling or the lack of regulation, too many debt management companies have been caught offering a sub-standard service to vulnerable consumers.

‘If you’re struggling with debt, you’d be far better to avoid debt management companies altogether and to approach a free debt advice organisation instead. Citizens Advice, Consumer Credit Counselling Service, Payplan and National Debtline all offer impartial debt advice that is free to the consumer.’

More on this…

  • Reasons to avoid debt management companies – why you could be putting your finances at risk
  • How to deal with debt – our free guide provides contact details for free advice organisations
  • Repossession and how to avoid it – how to manage your mortgage problems
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