Struggling families warned of risk from private debt firms
Published 10/02/2010 | 05:00
HEAVILY-indebted consumers were warned yesterday to be careful they do not end up being ripped off by companies claiming to help them get some of their loans written off.
The state-backed Money Advice and Budgeting Service (MABS) said that some debt-management companies are claiming that they can get up to 75pc of debts written off.
But a MABS spokesman Michael Culloty said it would be "extremely exceptional" for this to happen. Consumers considering commercial debt services should thoroughly check the fees and services beforehand. MABS is the only free and independent debt advice service in the State, Mr Culloty said.
He added that debt-management companies are not regulated in this country.
An investigation by the Irish Independent uncovered that some commercial debt advisers are preying on struggling families and charging up to €3,000 to advise them on sorting out their finances.
As householders get snowed under by mounting bills, there has been a surge in firms setting up as private debt advisers.
They can operate here without any regulation and many of the advisers moving in here in the past few months are from outside the State, with a number from Britain.
A number of debt advisers operate a system where consumers cancel direct debits and standing orders, and redirect all monthly repayments to the debt advisory firm instead.
The firm then takes a percentage as a fee.
They will sort out a heavily indebted household's outgoings and renegotiate their loans with lenders. Often they get lenders to freeze interest on debts.
They then take the first month of the new repayments as a fee and charge between 10pc and 20pc of each subsequent monthly repayment, plus VAT of 21pc.
Mortgage repayments would usually be excluded from an arrangement like this.
MABS can be contacted on 1890 283438.