Debt firms 'take advantage of vulnerable'

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The Independent Online

They are rarely off day-time television and claim to be able to turn seemingly unmanageable debt into hardly noticeable monthly repayments.

They are rarely off day-time television and claim to be able to turn seemingly unmanageable debt into hardly noticeable monthly repayments.

Debt management companies have flourished in the past few years, as one of the main by-products of the surging increase in consumer borrowing.

But consumer organisations are warning that the tightening grip such companies have on individuals might mean the very people least able to cope with bills are the ones who pay the most, through fees to the management companies and longer repayment periods.

The Consumers' Association published a stinging report on the companies, which include Baines & Ernst, Accord, Gregory Pennington and Debtcare Financial Management.

Helen Parker, the editor of the Consumers' Association magazine Which?, said: "The debt management industry is showing a shocking contempt for the Office of Fair Trading's standards. People in serious debt are desperate and vulnerable and it is far too easy for these companies to take advantage of that."

The consumer watchdog highlighted examples such as a woman who agreed to allow a company to help her. The company charged her a £29 monthly fee, with only a further £20 going to pay off her debts.

Which? also highlighted a problem where a company suggested that its undercover researcher take out a Royal Bank of Scotland bank account that cost £25 to set up and cost £8 a month.

"We consider this unacceptable because a person could go into a high street bank and take out a basic bank account for nothing," Which? said.

The watchdog criticised some of the most prolific advertisers on television. Of one it said: "We found that the sales process was high-pressure. You feel completely haggard after going through it so you feel like you should sign up with them rather than go through it all again."

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