Customer worries over debt management firm

By Samantha Washington
Donal MacIntyre show, BBC Radio 5 live

Personal debt levels in the UK have soared to over £1 trillion.

"I don't believe they're providing any service to people that's beneficial at all. It's money for nothing."

Louise Cowan from Belfast needed some extra cash. When she saw an advert for loans with Welsh loan broker, Yes Loans, she immediately got on the phone.

Believing she had been accepted for a loan, she says she happily handed over her bank details in order to complete the application.

But she says she was transferred to another member of staff who then told her she had been declined for the loan.

Instead, the sister company of Yes Loans, called Money Worries said it could offer her a debt management plan to help her through her financial difficulties.

I never signed anything, and I never gave them consent. It's caused us lots of hardship Louise Cowan, customer

The sales agent told her that Money Worries would negotiate with her various creditors to get her debt into a single affordable monthly payment.

For this, the company would take an upfront fee, and a percentage of each instalment.

Louise says she made it clear she did not want to go ahead without first consulting her husband.

No consent

So she was shocked when she opened her next bank statement and saw that money had been paid to Money Worries.

"I never signed anything, and I never gave them consent. It's caused us lots of hardship."

The unexpected expense put Louise's account into unauthorised overdraft and she incurred further bank charges.

MONEY WORRIES STATEMENT Read the written response from Money Worries here

Money Worries says that Louise did consent verbally and says it did undertake work on her behalf.

And in a statement, it adds: "We categorically deny that we take fees from customers' accounts without them realising."

It says details of payments are "clearly explained in plan intelligible language in the documentation we provide to customers".

But according to former employees of Money Worries, what happened to Louise isn't uncommon.

One whistleblower told the BBC that a large number of Money Worries' customers were passed through from Yes Loans.

And she says that the scripts were carefully worded and some people have consented to payments without necessarily realising it.

Whistleblower Megan - not her real name - wants to remain anonymous, for fear of reprisals.

According to her, consideration for the customers' best interests may not have been the priority in taking this fee.

"Staff were allowed to ask people if they had any credit cards, so they could max those out, which is ridiculous, because it would put people more in debt."

Desperate situation

Rod is another unhappy customer of Money Worries. He says that while he did consent to pay for its services, he continued to receive letters from the institutions he owed money to advising him that his debts remained unpaid.

He says he paid more than £500 to the company and that his dealings with the firm left him worse off than before.

"I really believe that this company… are simply using the absolute desperation of people who really have little or no option to make money. I seriously contemplated suicide on a number of occasions."

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Money Worries has told the BBC that Rod's creditors were not paid because he was not able to make the regular payments.

However, former employees of Money Worries told 5 live's Donal MacIntyre programme that creditors are sometimes not paid or not paid promptly.

Whistleblower Megan remembers boxes of cheques of creditors' payments just piling up in the office after being returned because they contained administrative mistakes.

"It wasn't dealt with until it was realised that there were boxes and boxes of them [cheques] potentially worth thousands and thousands and thousands of pounds which should have been paid to creditors."

Money Worries says that payments to creditors can sometimes take many weeks to finalise while the company waits for them to agree to the negotiated instalments.

But its statement stresses: "All client money we receive is kept in a separate client account in accordance with Office of Fair Trading requirements.

"It is not usable by us and does not benefit us financially.

"If for any reason a delay occurs in paying creditors on behalf of our customers, we take whatever steps are necessary to put the customer in a position where they do not suffer any detriment as a result."

The statement also points out that Money Worries recognises that not all the potential customers it speaks to needs its debt management service and suggests alternatives for those people. "We refer approximately three times as many people to other organisations for alternative debt solutions than we take on as clients of Money Worries," it adds.

Unregulated industry

Beyond the specific case of Money Worries, there are wider concerns about the UK's debt management industry.

The sector is currently unregulated, although the government has recently announced a consultation as to whether this should change.

The conclusions of the consultation are expected to be published before the end of the year.

There is an industry body called the Debt Managers Standards Association (DEMSA). Membership of DEMSA commits the firm to a rigorous code of conduct which is approved by the Office of Fair Trading.

An estimated 150 firms charge 300 000 people for debt management services

But only a small number of companies are currently signed up.

In the last 10 years it has been estimated that the number of debt management companies has increased significantly.

The Money Advice Trust estimates that there are now over 150 firms offering debt management services to over 300,000 people for a fee.

Its research further found that the quality of service varied.

Poor practice identified included creditors being paid late or not at all. There was also some evidence that customers were not clear on the level of fees they were being charged and they were sometimes put in a worse financial position.

As for Money Worries customer Rod, he is now getting his finances back in order thanks to a free debt management service.

"It will be many years before I am clear of debt, and money remains very tight, but I am now sure there is a future."

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You can hear the full report on the Donal MacIntyre programme on 5 live on Sunday, 15 November 2009 at 1930 GMT or download the free podcast. Contact the programme by emailing [e-mail]