EuroDebt Comment on the OFT Review of Debt Management Industry
EuroDebt believes the OFT's review of compliance levels (announced 3 November 2009) across the debt management industry is timely given the influx of new players in this market in the last few years.
"Since the last review the Debt Management sector and the economy have changed dramatically" confirmed Kevin Still, Director, EuroDebt. "We are now seeing much higher levels of unsecured debts, with the average level of debt for a EuroDebt client running at over £29,000 with 8 creditors. For homeowners this is over £35,000 with 9 creditors.
"The Money Advice Trust [MAT] recently produced a report on the fee charging sector and it would appear that the longer established players and those with a large number of established clients, like EuroDebt, have moved with the times, reporting high DMP acceptance rates with creditors and longer retention periods on plan.
"There has been, however, a major influx of new players in the last few years. Many of these are current or former secure loan brokers, networks and packagers. A number of AIM listed Insolvency Practitioners have also extended their range of services to include Debt Management following the introduction of the IVA Protocol.
"Track records vary from one provider to another and we certainly believe there needs to be better clarification and supervision of the sector as a whole with meaningful statistics on the performance of DMPs, much along the lines that we get from The Insolvency Service for IVAs and Bankruptcies. Similar figures are produced in Scotland for Protected Trust Deeds.
"We are also pleased to see that the OFT will be including the not-for-profit sector in its consultation, as they are subject to the Debt Management Guidance as well. We believe it's crucial for consumers to be able to see how this solution works for them, compared to the fee charging offering made by companies like EuroDebt.
"We, therefore, look forward to actively working with the OFT in its consultation and look forward to the outcome in early 2010."
The aim of the compliance review is to gain a deeper insight into the evolving practices of debt management firms. The review will inform any subsequent revision of the OFT's debt management guidance and could lead to the OFT taking formal action to stop any identified consumer harm.
The review will include a sweep of online debt management advertising, an online form for consumers wishing to complain about a licensee and a questionnaire to licensees involved in debt management.