Consuming Issues: Who can you trust for sound debt advice?

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Debt advice is becoming crucial as more and more people sink into a financial morass. But Coalition cutbacks mean free help – from the likes of Citizens Advice – will become relatively scarce. The charity said last week it is being forced to get rid of 500 advisers. So where does that leave all those people who need help with their debts?

A simple search on the internet yields hundreds of firms claiming to offer advice. But many are not what they appear. Some seem simply to want to profit from the plight of desperate families by taking upfront fees which can often leave people worse off and no nearer a solution.

The practice has caught the attention of the Office of Fair Trading, which has withdrawn licences from 50 firms. "The recent news that 50 debt management companies have failed to meet the OFT's requirements to keep their licence is further evidence that the fee-charging debt management industry is not fit for purpose," says Joanna Elson, chief executive the Money Advice Trust, a debt charity.

"The OFT originally investigated 143 companies, more than a third of which have been unable to respond to the OFT's concerns about their poor practices.

"It will be difficult for consumers to put their faith in this type of company knowing just how widespread these poor practices are."

But that doesn't necessarily mean all debt managers are bad. Several firms have grouped together to try to improve standards in their industry. For example, if you go to the website of the Debt Managers Standards Association (, you can get details of 14 firms that have agreed to obey a code of conduct approved by the OFT.

The Debt Resolution Forum, meanwhile, promotes professional standards among debt managers ( "Debt Resolution Forum was founded by a dozen or so firms who knew high standards were critical to creating an industry consumers, creditors and regulators could trust," says Andrew Smith of the Forum. "It now has roughly 40 members."

Smith is scathing of companies that ask people to pay money up front. "It's never necessary to pay up front for debt advice," he says. "Reputable company's fees are taken from the monthly payment worked out, which the debtor can afford. Firms that ask for up-front fees rarely deserve them; often they just pass your case on to another advisor – who may be paying them too – and they are best avoided."

But vulnerable people in the middle of a debt crisis are easy prey for rogue debt managers. While the OFT is working on shutting down as many dodgy firms as it can, there are still plenty out there. But they are under attack from the pioneering work of Zero-credit, a co-op of debtors.

Its members have just completed a second mystery shopping exercise among commercial debt counsellors to highlight those that abuse the system by failing to be compliant, or at least failing to demonstrate that they are operating with a licence. Its research showed that of 10 debt managements websites, only four appeared to hold an appropriate consumer credit licence while four appeared to have no licence whatsoever. The remaining two appeared to have lapsed licences.

Debt management firms are not to allowed to operate without a consumer credit licence, so Zero-credit has passed its evidence on to the OFT for it to deal with the firms. The co-operative plans to repeat its mystery shopping exercise every two months; it also publishes how-to guides to help debtors.

Like all co-ops it's only as strong as its members, who pay £30 a year to join. "We believe that when consumers own the information used to develop products and services, there is a far greater likelihood that supply will reflect need," Emma Bryn-Jones, founder of Zero-credit, explains. "Subscription benefits include access to a minimum of one original resource per month, opportunities to shape the work programme, and further economies of scale through collective commissioning."

Anyone interest in supporting this important work can find out more at

Meanwhile, any people with debt problems can still find free advice at any branch of Citizens Advice, National Debtline (run by the Money Advice Trust) on 0808 8084 000 or at the Consumer Credit Counselling Service at