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Is bad advice making debt management unmanageable?

As austerity Britain bites personal debt has become even more of a pressing matter for many. The problem is so great and such a feature of our modern lives that legislation has struggled to find the answers that are fair to debtors and creditors. A whole new industry has evolved and rapidly expanded to address the problem of debt management.

The debt management system where someone offers to pay their creditors over a number of years in managed stages is perhaps the best known, due to the massive amount of marketing undertaken by these companies on TV, flyers and cold calling on the telephone.

Richard Fergusson Head of the Insolvency and Debt Recovery team at Keeble Hawson LLP commented:
“The Office of Fair Trading (OFT) recently published its findings after a review of the debt management industry – initiated following concerns of individuals in debt being exploited.”

“Across this largely unregulated industry the OFT indicated that more than half debt management firms have failed to adhere to guidance and has threatened to withdraw their consumer credit licences unless they meet current standards.”

“The complaints from consumers included high fees, poor advice and not dealing with complaints correctly. Misleading advertising was also highlighted – including in some cases companies giving the impression they were government or charitable agencies.”

“For example The OFT has refused an application to use ‘The Bankruptcy Helpline’ and ‘The Insolvency Helpline’ as trading names.”

In response to this the OFT are updating debt management guidance and want support initiatives to make the industry more responsible including ongoing pro-active monitoring, on site visits and developing accredited training programmes.

Richard continues:
“Britain’s personal debt currently stands at around £1.7 trillion. The management companies say they do fulfil a need – particularly because free to use services are inundated because of the high levels of debt. So where do we go from here?”

“Whether debtor or creditor against this background debt management does offer one solution that can benefit both debtor and creditor - but as always proceeding with caution and seeking out proper advice is recommended.”

“With guidance a debtor can also perhaps come to an arrangement that’s fair – but not necessarily formal – for both parties. Legal loopholes that might affect either also need to be covered.”

At Keeble Hawson LLP we would always recommend you seek proper advice. Our team, who have in depth knowledge of this area, would be would be pleased to give initial advice be you a debtor or a creditor.

Richard Fergusson can be contacted at: richardfergusson@keeblehawson.co.uk