Debt advice…not for the faint-hearted?

Sunday, 24th August 2008 23:53 - by Resident IFA

The Government is finally considering placing some form of regulation on the Debt Advisory/Management sector. As debt is a financial concern – and most other finance sectors are regulated – this action is long overdue, in my opinion. At the moment, you can set up as a Debt Counsellor simply by purchasing a Consumer Credit Licence (only £725 for a company) from the Office of Fair Trading (OFT). Permission ‘E – Debt counselling’, allows the holder to “advise individuals about how to discharge specific debts” (Source: OFT website). The first point of call in years gone by has been to contact your local Citizens Advice Bureau (CAB) – a trusted hand on the tiller in debt problem terms. I am sure for a lot of people this is still the case, but we have recently seen a rise – due to the surreal UK debt situation – in unregulated ‘Debt Advisors’. For two straight years now, UK personal consumer debt in the form of mortgages, loans and credit cards has been higher than the UK’s income, or Gross Domestic Product (GDP). The nationwide firm of Accountants, Grant Thornton, has declared that GDP was £1.41 trillion in the year to the end of June, whereas consumer debt was £1.444 trillion in the same period. Crazy or what?! So, you can see why there has been the aforementioned rise in Debt Advisors. Don’t get me wrong, most Debt Advisors are probably conscientious and honest, but some will undoubtedly lack the skills to advise. I have been quite fortunate in that I have met two trustworthy and experienced souls over the past few years, both of whom I could confidently recommend to my Clients, should the need arise. Fortunately, this has not been the case, bar a former colleague who managed to rack up a 6-figure credit card debt whilst advising people on their own finances…a clear case of ‘Do as I say, not as I do’! I digress, my main thrust being to urge those with debt problems to react quickly to their impending or realised situation, talking at the outset to those companies they owe money to. If this fails, you have the Citizens Advice Bureau, personal recommendation or the Yellow Pages, I guess. For pity’s sake, though, question anyone long and hard who does not come to you via personal recommendation. What experience do they have? Do they have a Consumer Credit Licence? Will they provide written advice? Do they have (professional) indemnity insurance? What are their fees, and how/when are they paid? Do they talk to your creditors first or take you straight into an Individual Voluntary Arrangement (IVA) or bankruptcy? The Government is likely to bring in their regulation of Debt Management Plans (DMPs), including the structure and fees of these plans, in approximately 2 years time. This is a great move forward. In the meantime, if you happen to be struggling with debt and are seeking advice, care is the watchword - let common sense rule. Until next time…