Debt management may be regulated

By Mike Sergeant
Business reporter, BBC News

The average household is £9,000 in debt excluding mortgages

The government is launching a consultation about the future of debt management companies, which are currently largely unregulated.

The companies negotiate on behalf of people who are having debt problems.

They talk to their clients' various creditors and persuade them to agree to reduced payments, usually to be made over a longer period of time.

But fees are added to the repayment amount and vulnerable customers may not always be properly informed or advised.

Government officials do not want this to be seen as a crackdown on debt management companies, but they say there is a need to examine the system more closely and find out whether customers are getting appropriate help tackling their debt problems.

Need

The average household in Britain owes £9,000 excluding mortgages.

About 100,000 debt management agreements are reached every year.

Citizens Advice Head of Consumer Policy Sue Edwards said self regulation of the firms involved had been shown to be not good enough.

"Our evidence shows that there is a need for statutory regulation of debt management schemes," she said.

"Unfortunately this isn't always the case at the moment and while we do see some good practice, we also see cases where people doing all they can are still being harassed by creditors and threatened with enforcement action, extra costs and added stress," she added.

Consultation

The consultation by the Ministry of Justice is expected to conclude in December and the government will make an announcement early next year.

It will consider three options, depending on the opinions expressed by the companies and their customers that take part in the consultation: