Three debt-management firms based in Lichfield, Staffordshire, have been making struggling customers pay 90 per cent of their monthly payments in fees – meaning only 10p in the pound of their repayment has gone towards clearing their debt.
The Financial Conduct Authority this week stopped the firms from doing any more business and warned clients about Sterling Financial Security, Haydon Associates and Clear View Finance – saying they may be left with a debt larger than they expect, even if they have been paying into a plan for some time.
The City watchdog is reviewing the authorisation of all firms providing debt adjustment or debt counselling.
Joanna Elson, chief executive of the Money Advice Trust, said: "It is shocking that nine in every ten pounds that people have handed over to these firms has been taken in fees rather than being used to pay down their debts. It isn't right for people who have taken the brave step of tackling their debts to be treated this way. It shows the dangers of turning to profit-driven debt-management companies."Reuse content