Regulation required for companies making money out of people in debt.

I have lent my support to a cross-party campaign calling for fee-charging debt management companies to face greater regulation after it was revealed that many are flouting rules meant to protect consumers.

The campaign for better regulation wants to stop consumers getting a bad deal from the private companies who charge those in debt to negotiate with and/or set-up payment plans with creditors.

The cross-party call for more effective regulation includes:

• an immediate ban on cold calling
• an immediate ban on the charging of upfront fees for debt management
• effective auditing of for-profit debt management companies

In March, a super-complaint to the Office of Fair Trading, made by Citizens Advice, highlighted the harm done to consumers by widespread misleading marketing and excessive charges. In some cases fees are not even passed on to creditors.

In May, the All-Party Parliamentary Group on Debt and Personal Finance submitted its call for more effective regulation to the Department for Business, Innovation and Skills’ Consumer Credit and Personal Insolvency Review. This followed the publication earlier this year of the Office of Fair Trading’s own investigation into compliance with existing rules. The review found that breaches of its guidance were widespread with misleading advertisements and poor levels of competence among their front line staff commonplace.

I’m calling on the Government to take urgent steps to introduce more effective regulation of the companies who make money out of people in debt. All too often these companies are not debt management companies but debt exploitation companies.

Of course, not all fee charging companies break the rules but the whole sector needs reform so that consumers know that they can trust those companies offering to help them with their debt.

If anybody is worried about their debt they should seek free advice from their local Citizens Advice Bureau. I know from working with my constituents that the Citizens Advice Bureau’s free debt management help can really change people’s lives: so if you need help, visit the CAB.”

The Early Day Motion on “Regulation of fee-charging debt management companies” is available here.