Consumer debt management firms call for regulatory code
Published 24/03/2010 | 05:00
PRIVATE companies that offer debt advice and debt management are attempting to form an association in a bid to have the sector regulated and help them get banks to deal with them.
The move comes as some debt advisers have been accused of false and misleading claims.
New debt management companies are springing up almost every week.
Yesterday, the Irish Mortgage Corporation launched its CredyCare offering to assist heavily indebted consumers negotiate with their creditors and put a new household budget together.
Frank Conway of CredyCare said: "We will help people experiencing problems with debt."
Mr Conway's company, along with Debt Plan Ireland and MoneyVillage, have been to the fore in attempts to form an association and set minimum standards.
Last year, the Law Reform Commission called for regulation of debt advisers.
Bill Hobbs, a commentator on consumer financial services, has submitted a proposed code of conduct for debt advisers to the Department of Finance and the regulator.
The Department of Finance said yesterday it has no plans to regulate the sector.
Mr Hobbs said there was an urgent need for regulation because of false and misleading claims and predatory selling by some debt advisers.
He echoed recent warnings by the Money Advice and Budgeting Service that debt advisers were making false claims that they can get heavily indebted consumers up to 75pc of their debts written-off.
The proposed code of conduct written by Mr Hobbs calls for a cap on the fees being charged.
A number of debt advisory companies operate a system where they take over the management of debts of a consumer.
They will negotiate with lenders on behalf of the cash-strapped consumer, and try to strike a deal with the bank or credit card provider.
The consumer also agrees to cancel all standing orders or direct debits and redirects them to the debt management company which pays the lenders on behalf of the consumer.
Most debt management companies take a fee of €500 up front and up to €50 a month.
Alternatively, the first month's rescheduled payment is taken by the debt management company and up to 20pc of the rescheduled monthly loan repayments.
Mr Hobbs said the profit margins for operators taking a percentage of the rescheduled repayments were massive.