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Debt management plans to jump by third say Moneysupermarket

Article by Paymex 3rd Feb 2010 00:00

High unemployment and rising interest rates are expected to drive a 30 per cent rise in the number of people seeking debt management plans in 2010, according to moneysupermarket.com.

But the personal finance website warns that many people in debt are unaware of the potential pitfalls in the unregulated minefield of the debt management industry.

Due to the surge in the number of people in financial distress many free debt advice providers such as CABx are experiencing unprecedented levels of people seeking help, leading to long waiting times and prompting people to switch to a fee-charging debt management plan for instant advice and solutions.

Tim Moss, head of loans and debt at moneysupermarket.com, said: "We can expect to see around 30 per cent more applications for debt management plans this year and consumers have to be very careful when dipping their toe into this world, as it currently exists outside the realm of government regulation."

Because debt management plans are unregulated and providers are not compelled to publish standard practices, there is no way for debtors to know if a firm’s fee levels are acceptable.

Moss said: "We have heard of horrific cases where up to six payments are taken in charges before a creditor is paid, this means you will have paid lots of money to the debt manager before they have cleared a single penny of your debt.

"If you are going to use a debt management company you should only do so with your eyes wide open. Not being fully aware of all the charges involved could make a bad financial situation much much worse," he added.

Moneysupermarket.com only lists Debt Managers Standards Association (DEMSA) accredited debt managers on its site with the aim of ensuring consumers are treated fairly. Baines and Ernst is a member of both the debt solutions industry trade bodies, that is DEMSA and the Debt Resolution Forum (DRF).