They call out of the blue saying they'll rescue you from the red

James Moore reports on why companies that push individual voluntary arrangements may not be the answer to struggling consumers' needs
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The Independent Online

Debt management firms have been plunged into fresh controversy over "cold calling" potentially vulnerable clients offering to put them into a form of insolvency.

A company called the Debt Information Centre has been calling people to extol the virtues of "new government rules" that can enable debt-ridden consumers to write off a big chunk of what they owe.

It is pushing the individual voluntary arrangement (IVA) – a form of insolvency that has become hugely controversial because of the aggressive way in which companies have marketed them.

While they do enable consumers to clear a significant amount of their debt over a five-year period, repayment schedules can be tough and inflexible, and can require homeowners to remortgage at the end of the five years to generate further cash for creditors. Critics say thousands have been mis-sold to people who would have been better off agreeing a free, and more flexible, debt management plan with creditors organised by debt charities.

The Debt Information Centre offers to connect callers to Debt Free Direct (DFD) if they are found to qualify for an IVA after answering a handful of questions. DFD is one of the most high-profile IVA firms.

However, the Debt Information Centre has no website and refuses to give consumers a callback number.

One of the firm's managers told The Independent on Sunday: "What we are is a public awareness campaign. We are set up to combat the rise of debt in the UK." He was reluctant to give further details about the company and went on: "You don't have to carry on with the call if you don't want to. It's your choice."

News of the firm's activities comes soon after iva.com, a comparison website, angered debt charities after offering the inducement of a £50 pre-paid "Bread" debit card to people who use the site to set up an IVA.

Such techniques come despite a "protocol" agreed between banks and IVA firms to cut down on aggressive marketing and curb alleged mis-selling.

A spokeswoman for Citizens Advice said of the Debt Information Centre's activities: "We are concerned that this type of calling could induce people to buying products that are not appropriate to them." Citizens Advice also fears that the cold calling might not violate the protocol, which is only voluntary.

The concerns are echoed by the Consumer Credit Counselling Service. Its chairman, Malcolm Hurlston, said: "It isn't good practice to be calling people at home and offering debt management. It is something we would have hoped would have been stopped."

A spokesman for DFD admitted using the Debt Information Centre for "lead generation" but said this had been stopped last week. It is understood the company had been concerned about what was seen as the poor quality of the leads.

The spokesman said: "Any leads that do come through to us go through best advice before an IVA would be set up. Only a small percentage actually become IVAs, and DFD is very strict in exercising checking and best advice."

A spokesman for the British Bankers' Association said cold calling seemed "an inevitable consequence of the commercialisation of IVAs". But he added that the Debt Information Centre could be referred to the committee of banks and IVA providers set up to monitor the protocol.

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