Are the worth the extra of Debt management companies?
Anyone who has watched a lot of daytime television will be only too
aware of the huge advertising effort of debt management companies
such as Baines and Ernst to attract new customers.
The other aspect to the whole arrangement is that the debt management
companies cannot guarantee the agreement of creditors to withhold
sequestration proceedings or refrain from seeking court decrees against
the debtor. In many cases decrees will be granted against the debtor
as the instalment proposals offered by the debt management company
are unreasonable.
Against this background it is very difficult to see what benefit this
service (at an additional monthly charge) is to individuals who are
already in significant financial difficulties.
A report, commissioned by the Federation of Independent Advice
Centres (FIAC), found that many clients did not seem to understand
the payment system and were unaware they would forfeit their initial
payment should they break their contract with the company.
The report was undertaken because of widespread concern about debt
management firms, which range from one man bands to nationwide
operations.
The report also warned that the lengthy negotiations which some
debt management firms conduct with their clients' creditors
"mean that some clients could be making payments to debt management
companies for several months before any money is passed on to
creditors".
But FIAC also points out that some firms are much more client-friendly
and says the better ones help people work out affordable debt
repayment plans that they stick to. It argues that despite the
hostility of some creditors and providers of free debt advice,
debt management companies are not going to disappear and should
therefore be properly regulated.
This is certainly an area of great concern, and in a society where
more and more consumer credit is being given every year, there
should be greater regulation for firms who charge a fee to
reschedule debt. Ever decreasing resources for the providers of
free debt advice services such as local authorities, has meant
more and more profits for debt management companies, who charge
a significant amount of money to the people who can least afford
it - for a service which often achieves nothing or even increases
the debt burden.
I think you're right. Every other advert on Cable seems to be for debt
management, by Carol Vordeman who should know better. Or for the equally
dubious ambulance chasers like Claims Direct.
Lets face it both leave a bad taste, as you know they're basically going
to screw vulnerable people. It's about time the contingency legal fee
legislation was revisited, and the various financial watchdogs (There
are oodles of them) took a long hard look at debt management.
The speed these companies are growing at alone gives cause for concern