Payplan has welcomed the “Stop the Debt Rogues” campaign launched this week in the Daily Mirror. The Mirror’s campaign calls for a clamp down on the widespread bad practice by fee-charging debt management companies – with an estimated 400 firms operating in the UK, many are ripping off consumers and not paying their creditors. All but three of these 400 firms charge fees, and the industry is growing. In 2010, it was estimated that 250,000 new Debt Management Plans (DMP) were taken out, and the total cost in fees to consumers is likely to amount to over £1/4 billion. 

The debt management sector needs to be regulated as a matter of urgency to protect vulnerable consumers suffering at the hands of these unscrupulous providers. Payplan - a leading provider of free DMPs - has long called for the proper regulation of operators of debt management plans and today’s exposition in the Daily Mirror lifts the lid on an industry riddled with bad practice.

As part of their call to action, the Daily Mirror has launched an online petition which is available at http://www.mirror.co.uk/advice/money/2011/03/30/stop-the-debt-rogues-sign-out-petition-to-get-the-debt-industry-regulated-115875-23024970/ The debt management industry is currently regulated by the Office of Fair Trading (OFT) – but when the OFT published its Debt Management Guidance Compliance Review, assessing a large number of firms in the debt management market, it identified a litany of malpractice. It said that 129 firms were non-compliant with Debt Management Guidance, with which operators must abide as a condition of licence.  Other key areas of non-compliance included:

• excessive fees being charged by companies for their services with consumers often handing over the equivalent of multiple monthly payments to set up DMPs, leaving consumers even more in debt if arrangements fail as a result of not keeping up payments;

·      misleading advertising on websites – in particular, a lack of transparency around fees charged and debt management services misrepresented as free – the most significant area of non-compliance, and;

• front line advisers lacking competence and providing consumers with inadequate information and poor advice.

 The OFT is limited in their ability to protect the consumer effectively from this catalogue of bad practice as they lack two key regulatory powers; without the power to cap DMP providers’ fees and without the power to ensure transparent and clear debt advice is given by providers, the OFT can only do so much.  Crucially, the regulator must be equipped, with the right powers, to act swiftly and decisively against rogue providers.

 John Fairhurst, Managing Director – Payplan, said: “The Daily Mirror’s “Stop the Debt Rogues” campaign has picked up on a ground swell of public opinion, demanding that action must be taken against unscrupulous debt management providers. Payplan are receiving an increasing number of calls from consumers who have previously been with some of these fee-chargers, and we strongly feel that their interests have not been well represented.”

 “It is only through the introduction of statutory regulation that we can be sure that vulnerable consumers will be adequately protected from the worst excesses visited on them by some of these fee-charging debt management companies.” For free and impartial advice from Payplan, call: 0800 280 2816 or go to the Payplan website: http://www.payplan.com/

 Notes to Editors:

 Payplan is a free debt advice and solutions service that provides impartial advice to people in financial distress. Payplan helps over 100,000 people every year and works closely with organisations in the field of money advice and consumer and employee welfare. Payplan operates using the Fair Share Model – the credit industry offers voluntary contributions which helps to cover Payplan’s costs in order that they can provide services free to the client in need of assistance.