These dangerous debt managers must be reined in

A clampdown on dodgy debt-management firms looks likely after the Government published a consultation document on Friday, questioning whether the firms need to be regulated. "Taking tough, swift action against firms which fail to operate within the rules and which provide sub-standard services to consumers with problem debt remains a high priority," said the Ministry of Justice.

The clampdown can't come soon enough for the estimated 150,000 people who enter debt-management schemes each year. They often end up paying unnecessarily for bad debt advice and help when there is plenty of decent, free advice out there. Many firms set up debt-management plans which are ostensibly designed to reduce monthly repayments, but once the firm's fees are added in, the repayment can end up more expensive than if they hadn't set up the plan at all.



Struggling families also often end up hassled by creditors because the advice they've been given just hasn't been good enough. "Often these companies only sell debt-management plans or consolidated loans, whereas people may be better off taking another route, such as bankruptcy," points out Beccy Boden Wilks of the Money Advice Trust, a debt charity.



Tim Moss, the head of loans and debt at Moneysupermarket.com, says: "The debt-management industry is in desperate need of full regulation. There are an estimated 800 debt-management companies operating in the UK, some of which are one-man-in-his-bedroom type operations, acting under no law or guidance. Without regulation, debt-management companies are free to act in ways that are clearly harmful to the consumer."



That's the problem with many of the new firms. They prey on hard-up folk, desperate for help. And when someone turns up with a promise of sorting out their finances, they grab hold like a drowning man clutching a lifeline. But in many cases, the so-called lifeline can leave them in an even worse situation than before.



Have you ever wondered what happened to all those commission-hungry financial salespeople who flogged unsuitable endowment policies in the Eighties and Nineties before turning themselves into sub-prime mortgage brokers to profit from the property boom? Many have remade themselves as debt advisers; they know that it has become a growth market and with fat fees can fleece cash off the unwary.



There are plenty of reputable debt firms around that can help people without charging them the Earth. But finding them among the mass of smooth-talking salesmen more interested in lining their own pockets can be impossible – which is why we need action now.



Ditch the dogs



Some of Britain's worst-performing funds were named and shamed last week in a report by independent financial advisers Chelsea Financial Services. Some 64 funds are in the Relegation Zone report, including funds from well-respected names such as Scottish Widows (seven funds named), Legg Mason and Rensburg.



The funds were compared against others in their sector, and the results make for grim reading. But excuses of global recession and market volatility just don't wash any more. As Chelsea's Darius McDermott points out: "The credit-crunch excuse is beginning to sound like a broken record. There is a great chasm between posting losses of 5 per cent and 40 per cent."



If you're stuck in a dog of a fund then get your cash out quickly, before your losses deepen.

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Project manager - Web E-commerce

    £65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

    Robert Fisk on Syria air strikes

    ‘Peace President’ Obama had to take stronger action against Isis after beheadings
    Will Lindsay Lohan's West End debut be a turnaround moment for her career?

    Lindsay Lohan's West End debut

    Will this be a turnaround moment for her career?
    'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

    The follow-up to 'The Tiger Who Came to Tea'

    Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
    BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

    BBC Television Centre

    A nostalgic wander through the sets, studios and ghosts of programmes past
    Lonesome George: Custody battle in Galapagos over tortoise remains

    My George!

    Custody battle in Galapagos over tortoise remains
    10 best rucksacks for backpackers

    Pack up your troubles: 10 best rucksacks for backpackers

    Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world