Debt Management Companies under the OFT spotlight

Debt Management Companies under the OFT spotlight

Following a recent investigation by the Office of Fair Trading, 129 warning letters were issued to debt management companies in regards to the way they run their businesses. The businesses on the receiving end were given 3 months to improve their standards, and prove they had done so by submitting an independent audit showing that they are acting compliantly with the OFT's published debt management guidance.

People suffering with debt problems looking for credit debt management services may well be worried by the negative reports and could be put off contacting a commercial debt advice company. However, the reality is that consumers should gain confidence on the back of the OFT's tough stance because if they are taking hard action against the bad eggs' it will surely mean that people will only be able to deal with the remaining reputable, compliant firms.

Dealing with debt problems is not a pleasant experience for many, and people are prepared to pay a little extra to let a professional company get on with things so that they don't have to. Debt management companies have been criticised in the past for charging fees to people already suffering financial hardship however people are often prepared to pay for a service if the fees are worth it. If a debt management company can negotiate with a lender to freeze interest and charges for example, the amount then saved over the term will far outweigh the fees charged. Also, professional companies can often help ease the burden of incessant creditor contact by telling the client to deflect the final demand letters and demanding phone calls onto the DMC. This can be a big weight off people's shoulders and a huge relief to many individuals.

Some may say why use a debt management company when you can do it yourself for free? Well, people can mow their own lawns and wash their cars themselves for free but many choose to employ gardeners and visit car washes for the convenience. Yes there are free charitable services that people can turn to many of them offering exemplary advice however with cost-cutting at the forefront of government policy at the moment, supply is falling whilst demand remains high. Not everyone can get to use the free services, so this means many have no choice but to seek advice in the commercial sector.

The facts are that the vast majority of debt management companies will offer a decent service to most individuals and although many DMC's would agree that there have been problems in the past, most private sector companies fully support the OFT's stance against rogue companies and the underlying ethos for most is to be fully compliant with the OFT guidance. Consumers should always ensure that DMC's have a current consumer credit licence because without this they would be giving debt advice illegally. The other thing to check out for added confidence could be a membership of a professional association such as the Institute of Credit Management (ICM).

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