Better regulation for debt management companies on the way.

Posted in 'Dealing with Debt' by Richard Catlin

13 January 2010

The Ministry of Justice (MOJ) has published new guidance for consumers on the Directgov website, which is intended to help those under debt stress to become much better informed before jumping into Debt Management Plans (DMPs). Clearly setting out the advantages and disadvantages of DMPs, the guidance also shows consumers how to check that a Debt Management Company is properly licensed by the Office of Fair Trading.

The move comes half way through the MOJ’s consultation process, which amongst other things is currently looking into debt management companies and their practices. It is expected that as a result of the consultation, further regulatory changes will come into effect if it concludes that consumers need better protection from unscrupulous companies.

The Office of Fair Trading (OFT) is also mid-way through its own review of the debt management industry, its first for over six years. The wide ranging investigation will cover everything from the way that firms advertise their services to cold-calling and the way that fees are structured and disclosed. The OFT has already taken action - including revoking or refusing operating licenses - against debt management companies on 24 occasions since April 2008.

At the moment, debt management firms operate under a system of self-regulation, but it’s very likely that a more formal regulatory system could be introduced once all the findings are published.

Although official interest rates remain low, actual interest rates charged are comparatively very high, and debt problems remain a very real worry for many consumers, with fears that 2010 could see record numbers seeking help with unmanageable debts through schemes such as Debt Management Plans (DMP), Individual Voluntary Arrangements (IVA) or Debt Relief Orders, or through the traditional route of bankruptcy.

Remember, as well as being able to check your credit files based on all three credit reference agencies with checkmyfile, you can get free, impartial information on managing your debts, no matter what their size. This includes a plain English explanation of what each of the options means and can help you make a better informed decision of which route is best for you, should you find yourself in financial difficulty.

Visit our free Debt Advice Centre.