The Central Bank has launched a crack-down on the debt management industry and has publishing a revised Consumer Protection Code that includes additional requirements for debt management firms.
Such firms typically give advice to consumers about how to manage debts, and may negotiate with creditors on a consumer’s behalf.
“These requirements are being introduced to provide additional protections for consumers of debt management firms, who may be in a vulnerable position,” the Central Bank’s director of consumer protection Bernard Sheridan said.
“Debt management firms have a responsibility to protect their consumers’ best interests and we expect firms to demonstrate that they can deliver on this,” he added.
The code specifies that a firm can only charge a customer after the customer has signed an agreement which clearly specifies the charges payable for the service, the time when the charges must be paid, and the services that will be provided for the charges.
The code includes a ban on firms paying for client referrals or client leads, as well as a ban on firms arranging credit for consumers to pay off their debt management fees.
“Before signing any agreement with a debt management firm, the Central Bank encourages all consumers to make sure that they fully read and understand the amount and nature of any fees being charged and are also clear on what services they can expect from the firm in return for these charges,” Mr Sheridan said.
Michael Culloty from the Money Advice & Budgeting Service (MABS) – which is backed by the Citizens Information Board – told the Irish Independent that there have been concerns about some of the practices in the sector here.
“Commercialism at the level that we meet people is probably not appropriate, because you’re mostly dealing with very vulnerable customers who really can’t afford to make ends meet.”
“The regulation of this market therefore is crucial…in the UK there was a lot of abuse both in the way that these companies promoted themselves and also in their fees structure.”
"While welcoming [the regulations], we would also ask that the resources would be put in place to properly supervise this market in order to lay down a pro-consumer culture and not allow the abuses that were experienced in the UK and that were creeping in here post-Celtic Tiger.”
A report published by the UK’s Office of Fair Trading (OFT) in 2010 said the OFT had encountered companies masquerading as charities and “systemic” cold-calling.
Consumers’ Association of Ireland chief executive Dermott Jewell also welcomed the new Central Bank rules.
“It’s very positive…the whole idea here is to look at what was a poor situation for vulnerable consumers in debt and looking for help, and finding themselves later in the day with fees that they hadn’t been aware of upfront, no detail in relation to how their complaint was progressing.”
“When it came to the final decision, the consumers themselves didn’t realise in some cases that the decision had been made on their behalf.”