An independent review of the fee-charging debt management industryAuthors: Sharon Collard
Funded by: Money Advice Trust
Published by: Money Advice Trust
Publication date: June 2009
The first independent review of the fee charging debt management industry was published in 1999. A decade on, the Money Advice Trust commissioned the Personal Finance Research Centre to undertake a review of the industry, providing an update on the sector.
The review included a telephone survey with 53 fee-charging debt management companies, telephone depth interviews with credit industry representatives, and face-to-face depth interviews with customers of fee-charging debt management companies.
The objectives of the research were:
- To provide an updated overview of the industry, including its size and nature and the services it offers.
- To explore how creditors respond to fee-charging debt management companies, and their views and experiences of dealing with these companies.
- To explore consumer motivation and behaviour in seeking advice from fee-charging debt management companies, and in particular why some consumers choose commercial companies over free-to-client advice services.
Key findings from the report include:
- that the industry has more than tripled since the last review;
- a significant difference between the projected and actual duration of debt management plans, and
- a mixed picture regarding both good and poor practice.
The report welcomes the OFT's compliance review of its debt management guidance, which was announced in April 2009, and makes a series of recommendations including:
- fee-charging companies to be explicit at the outset with clients about costs incurred for services
- MAT should extend its promotion of the CFS further into the commercial debt management sector to improve the quality of financial statements supplied by the sector;
- trade bodies representing the fee-charging debt management sector should move towards a greater convergence of individual quality frameworks, and
- creditors and government should build on existing initiatives to ensure better public awareness of free-to-client services.
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