MSE News: Debt management firms may face regulation

edited 18 September 2009 at 4:55PM in Debt-Free Wannabe
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Former_MSE_NatashaFormer_MSE_Natasha
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edited 18 September 2009 at 4:55PM in Debt-Free Wannabe
This is the discussion thread for the following MSE News Story:

"The Government is considering regulating debt management companies to ensure that both consumers and creditors are being treated fairly..."

P.S. This post was inserted to give a full news story on the subject originally posted by MoneySaver fermi. Thanks!
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  • edited 18 September 2009 at 10:42AM
    fermifermi Forumite
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    edited 18 September 2009 at 10:42AM
    Link: Debt management may be regulated
    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.

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

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

    The consultation 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:
    • Leave the situation as it is and allow debt management companies to continue unregulated
    • Introduce a new code of practice for companies operating in this area
    • Bring debt management under a formal system of regulation.

    EDIT:

    Link to the consultation papers if you want to have a read:

    http://www.justice.gov.uk/consultations/debt-management-schemes.htm

    Debt management schemes - consultation paper (PDF 0.28mb 56 pages)

    Debt management schemes - impact assessment and annexes (PDF 0.50mb 58 pages)
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  • cat4772cat4772 Forumite
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    I can only hope that the government decides to either introduce a new code of practice or bring debt managemetn under a formal system of regulation.
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  • I hope it's going to be more than guidelines which never seem to be enforced. They are currently meant to agree to the guidelines to get their traders licence aren't they? Hopefully a few mystery shoppers will be able to plug up any weaknesses in whatever system they come up to force companies to stick to the rules.
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  • fermifermi Forumite
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    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

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  • fermifermi Forumite
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    And Crudit Today story....

    http://www.credittoday.co.uk/news/news-item.cfm?news=1332
    Debt management may be regulated - 18/09/2009
    The Ministry of Justice has launched a consultation process on the regulation of debt management companies.

    The consultation paper will explore whether intervention is needed through regulation in light of other government policies that have already been introduced to help people in debt and, if so, whether regulated schemes should be introduced and how they would work. The process will also involve studying whether tighter non-statutory regulation of current schemes would be more appropriate.

    One of the premises behind the consultation is to look at how debt management schemes could be improved to yield more benefits both for debtors and creditors.

    The paper: Debt Management Schemes – delivering effective and balanced solutions for debtors and creditors, seeks views from the industry on whether there would be benefits for debtors though more consistent charges. It will also explore the freezing of interest and other charges once a payment plan has been agreed and views on the opportunity to pay off debts over time without requirements to sell homes or other assets.

    Protection for debtors from enforcement procedures unless the creditor receives court permission will also be explored, along with better advice on the full range of options available to deal with debt problems.

    Changes to existing schemes, if introduced, would aim to ensure creditors receive maximum returns; do not need to spend time and money chasing debts; have clients’ financial details regularly provided to them in a consistent format and have confidence that they are receiving the maximum possible monthly instalment.

    The consultation precedes a move by the regulator to take a closer look at compliance in the sector.

    Later this year, the Office of Fair Trading (OFT) plans to launch a review of its debt management guidance to obtain a clearer picture of compliance levels within the debt management sector and take appropriate follow-up action.

    Justice minister Bridget Prentice said: "Debt can affect all kinds of people, especially in the current global economic downturn, and it is important that we protect people from sliding deeper and deeper into debt.

    "We aim to benefit both debtors and creditors, ensuring debts can be paid off without the vicious cycle of charges, interest, fees, confiscated assets and relentless creditor contact that can turn a debt problem into a debt nightmare."

    Business minister Ian Lucas said: "Our aim is to help people take control of their finances and pay off their debts quickly and fairly. We want a system which is fair to everyone involved so that debt problems don't spiral out of control."

    It is estimated that between 100,000 and 150,000 people currently enter debt management schemes each year.

    This MoJ’s consultation is published in conjunction with the government response to another consultation – Administration and Enforcement Restriction Orders; setting the parameters – which looked at reforming existing measures designed to help people with multiple debt. The MoJ said it would not have been possible to implement these reforms until April 2011 at the earliest.
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  • BrowntoaBrowntoa Forumite, Board Guide
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    personally think these should be statutory rules , similar to "Best Advice" on mortgages etc, Full disclosure of the fee's upfront and made to show the difference between using them and a non fee charging service
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  • Just a quick note to say we've posted a news story on this - the link's been added to the top of the thread.
  • fermifermi Forumite
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    Just a quick note to say we've posted a news story on this - the link's been added to the top of the thread.

    Thanks. :)
    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
  • I will believe it when it happens, but doubt it will work if it does, it will be the first regulation that does if it did
    Thats it, i am done, Blind-as-a-Bat has left the forum, for good this time, there is no way I can recover this account, as the password was random, and not recorded, and the email used no longer exits, nor can be recovered to recover the account, goodbye all …………. :(
  • RASRAS Forumite
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    The Government always think that volunary coes are the best way.

    It needs loads of people to complain about them.
    The person who has not made a mistake, has made nothing
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