Friday, 28 January 2011

Do we face a debt advice crisis?

Britain's banks have slammed the quality of debt advice in the UK, pointing out that poor advice compounds debt problems, creating a drag on the whole economy.
It prompts one to ask why public funding for free debt advice is being cut and 500 specialist advisers in England and Wales have been sent redundancy notices?

Here's part of what the British Bankers Association has to say:

"Individuals who find they are struggling with debt should be readily able to find appropriate advice to
help them, but this is not currently guaranteed. Free advice is not always available, and fee-charging
charging debt management companies (DMCs) offer a valuable service to consumers, filling the gap which
results from the scarcity of resources in the free-to client sector - by the end of 2010 there may be as
many as 562,000 fee-charging plans in operation compared to around 220,000 in the free advice sector.
However insufficient regulatory oversight and a lack of co-ordination by legitimate stakeholders in the debt
management sector have allowed poor practices to become established, meaning it is hard for customers
to be certain they will find the advice they need. The OFT recently warned 129 of 142 licensed firms to take
immediate action to change their practices or face losing their consumer credit licence, and identified
"significant and widespread examples" of fee charging DMCs offering the most profitable solution
for them, rather than the solution which was in the best interests of the consumer. Even if consumers
succeed in finding good advice they face a multitude of potential informal, formal and court-based debt

The banks recommend the creation of a single "portal" for debt advice, making use of technology and the internet and drawing together the "tools and expertise of existing charity based advisors such as the Consumer Credit Counselling Service (CCCS), National Debtline (NDL) and Citizens Advice".

The idea is that the vulnerable would be protected because by going to the portal they would be safe from the attentions of profit-making debt management companies. For a time, anyway.

Set-up funding of the portal would come from government, industry and the advice agencies' existing budgets. But eventually running costs would be covered by a share of the the debts recovered, which is how the Consumer Credit Counselling Service (CCCS) is funded at the moment.

It sounds impressive, if they could make it work. The big question is how we get from here to there, with debt advisers predicting that the the coming year will see an increase of hundreds of thousands in the numbers seeking help.

No comments:

Post a Comment