Borrowers pay firms hundreds to negotiate with banks
Published 03/12/2010 | 05:00
PRIVATE debt-advisory services are charging cash-strapped borrowers hundreds of euros to negotiate with lenders on their behalf.
There has been a huge surge in the numbers of private debt advice services operating in Ireland and it is an unregulated sector which consumers need to approach with caution, according to the Money Advice and Budgeting Service -- a free government-funded service.
One of these new services -- the Debt Advisory Centre Ireland (DACI) -- released a survey yesterday showing that a third of unemployed borrowers are in arrears on their repayments, and one in five owes more than €25,000.
It found that 30pc of jobless borrowers were behind with their repayments and 15pc were more than three months in arrears. The survey was carried out amongst 1,000 adults, 80 of whom were unemployed.
DACI was established in Ireland last month but operates from Britain, where it is part of Gregory Pennington, a debt advice body that has been operating in the UK for 17 years.
MABS spokesman Michael Culloty said the number of private debt-management companies setting up in Ireland in the last 12 months had mushroomed, some of which were coming in from the UK and some were homegrown.
It was an unregulated sector at present, although the Law Reform Commission was examining whether regulation should be introduced, he said.
"If people have the money to go down that route then that's their right, but they should remember there is free advice at the end of a phone," he said.
So far this year, MABS has dealt with 20,000 telephone queries from people in trouble with debt, of whom 1,000 were referred on to local services, while around 19,000 more had gone straight to local offices.
DACI, which was set up last month, charges clients an initial fee of between €225 and €475 to assess debt and repayment capacity and negotiate with lenders, followed by a monthly fee of between €32.50 and €85.
Its head, Elaine Whelan, said that they were upfront about their charges, which were some of the lowest in the market, and they would welcome regulation as they already operated to stringent Office of Fair Trade standards in the UK.
"We offer an alternative to MABS and some people prefer the anonymity we offer," she said.