The Advertising Standards Authority has just announced that they will not allow misleading advertising by debt management companies. Companies advertising “free debt management” will have to justify this by not charging for anything except packaging and postage fees. In reality, this will exclude 95% of debt management firms from advertising themselves as “free”.
Debt management is known amongst industry insiders to be highly under regulated online. Many firms that offer debt management services actually take significant fees, with very little money going to the creditors. They are also not legally binding agreements and as such do not have the formality of ivas, which are highly regulated.
Recently, the OFT have taken a harder stance on debt websites and have insisted that they properly represent themselves and their costs. It is however a constant battle as more and more sites emerge to take advantage of a debt ridden economy. “Free” can mean that the customer is not directly charged, however, by taking money that was due to the customers creditor, it comes to the same thing as charging.
Before entering into a debt management plan, it is wise to check the credentials of the company and to make sure free really means free. In most cases, it just does not. Going to your local citizens advice bureau is a good first step.