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Office of Fair Trading - Debt Management Guidance

The guidance

We will make only general comments on the guidance as presented for consultation since overall we are supportive of the measures in the document and feel that the new draft is an improvement upon the previous version.  Indeed, our principal comments do not pertain directly to the guidance itself but rather to the measures which exist to enforce the guidance effectively.

Firstly, as mentioned, we are supportive of the draft as set out.  It sets clear parameters within which debt management companies are expected to operate and which, if complied with, provide robust protection for vulnerable consumers against malpractice and abuse by unscrupulous firms.  We appreciate the fact that the guidance as developed seems to have been designed to address concerns that the credit union sector and others have been expressing for some time about the conduct of the debt management industry. 

Some of the key concerns that our membership has expressed about the conduct of debt management companies are as follows:

  • Delays in putting plans into place
  • Refusal to enter into discussions on a proposed plan – one member estimated this to be the case in 75% of cases
  • Unrealistic budgets – reports that debt management customers are sometimes encouraged to inflate their monthly outgoings to the limits of what’s acceptable
  • Disproportionate and unfair fees – 50% or more of total monthly payment in some cases
  • Dysfunctional relationships post plan-agreement – often payments are missed, irregular and therefore of little real benefit.

The guidance addresses each of these areas providing a much greater level of clarity as to what is expected of regulated firms and this is a very welcome step.

The full response is available to download below.