Debt Management Companies in the UK

The market for debt management companies in the UK can seem confusing to the layman and the expert alike. When the Personal Finance Research Centre at the University of Bristol prepared a report on the situation in 1999, they identified 40 companies as offering fee-charged debt management solutions. In a second report, published a decade later in June of 2009, this number had already risen to 150. These are, in fact, moderate estimates. Today, according to the BBC, some claim the market for debt management companies in the UK could consist of up to 300 to 400 competitors or even more. Clearly, debt management has become a serious and professional business. But what does all of this mean to you, as a debtor and a potential customer of these companies?

Before going on to answer that question, it is important to point out that the rise in the number of debt management companies in the UK represents an immediate response to a series of complicated developments. The availability of easy credit, for one, has flooded the market with cash based on unrealistic earning assumptions, which has in turn led to a flood of associated debt issues and bankruptcies. Not only are business insolvencies on the rise, with an increase of nearly 4 per cent during the first quarter of 2011, according to The Insolvency Service. But debt problems have long become a far-reaching problem for many individuals as well. In the quarter ended 31 March 2011, more than 30.000 households declared bankruptcy or entered into an Individual Voluntary Agreement. These are worrying numbers and despite their applaudable work, the variety of government- and charity-based organisations can no longer serve them all.

Unfortunately, the Office of Fair Trading have identified a variety of issues with some of the fee-charging UK debt management companies, which have brought the entire debt management industry into disrepute: Some of the UK debt management companies surveyed wrongly suggested they were providing their services for free, offering poor, inadequate or downright wrong advice and even went as far as to ask customers to take on further debt to pay for upfront fees. The aforementioned study on debt management companies reported of cases, in which the monthly amount due to creditors had actually gone up, rather than down, after applying for a professional debt management plan.

In response to these adverse developments, some of the serious debt management companies in the UK have started making it easy for customers to separate the wheat from the chafe. 2000 saw the founding of DEMSA, an organisation aimed at „promoting good practice in the debt management industry, and protecting the interests of the public and the lenders to whom they owe money.“ Members of DEMSA pledge to uphold these standards and to respect the needs of both debtors and creditors. The Office of Fair Trading has also set up issued guidance, which serve as indicators of acceptable and professional behaviour on the market for debt management companies. Finally, various awards have been created to distinguish leading debt management companies, which provides debtors with an indication about whom they can trust.

Post by: The Debt Advisory Line is a member of DEMSA and has been awarded several times for the quality and competence of its debt management plans. Contact us now for a professional perspective on how a debt management plan can help you avoid bankrupcty and re-gain your financial equilibrium. Calls our free national debtline at 0800 157 7254.

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