Possible Regulation for Debt Management Firms

In the current climate an increasing number of people have been contacting debt management firms for assistance with their finances, but there have been some concerns because the majority of these firms are no regulated. It has now been revealed that the government is looking into regulating these debt management firms and is launching a consultation in order to discuss this possibility.

There are now many debt management companies in operation, and these firms negotiate with creditors on behalf of those that are struggling to meet their debt repayments. Often they arrange for creditors to reduce the monthly repayment that they expect from the consumer and arrange for repayments to be made over a longer period of time. In some cases they are also able to persuade the creditors to freeze the interest on the debt to make it easier for the consumer to get it repaid.

However, the concern is that many of these debt management firms add hefty fees to the repayments, and for more vulnerable consumers this could cause a real problem. Some officials have questioned why consumers that are struggling with their debt repayments are then having to pay money to a debt management company when they could be putting that money towards repaying their debts.

Whilst many people think that they have to go through a debt management firm they can, in fact, contact their creditors themselves and propose a reasonable reduced repayment. In the current climate many creditors will be sympathetic to consumers’ situations and will be prepared to look at the proposal if the consumer is struggling to make repayments. Another option for consumers is to consider fee free debt management firms such as PayPlan, which do not take fees from the consumer as they are paid by the creditors themselves.

It is estimated that around 100,000 debt management agreements are put into place every year. The government has said that this is not an actual crackdown on debt management companies, but is simply an exercise to look more closely at the way in which they are working, and to ensure that consumers are getting the right advice and assistance.

Louise Ward has been a consolidation loans expert since 2001 and works for Loans4.co.uk, a company specialising in consolidation loans and homeowner loan solutions. Visit http://www.loans4.co.uk/ today for expert advice and consolidation loans.