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For those individuals experiencing heavy financial burdens of unmanageable debt, seeking debt advice and resolution to debt problems is imperative in gaining a foothold on the road to achieving successfully managed personal finance. The experience of being in debt can be emotional and so the news that the Office of Fair Trading has announced today that companies who offer debt management services are to be regulated with stricter controls can be seen as a positive step for vulnerable consumers.

David Brown explores these new proposals from the OFT in depth and examines the ways in which consumers are to be theoretically more comprehensively protected against immoral companies offering debt management services.

The debt management industry is one that, for the most part, is largely unregulated; though formal advice cannot be personally be given under regulations upheld by the Financial Services Authority, the provision of information can be freely distributed. With around 100,000 debt management agreements arranged each year in the UK, the OFT are proposing an implementation of regulation.

This regulation will, first and foremost, enable an establishment of trading and compliance practices adopted by companies providing services of debt management. In addition, it will also allow the Office of Fair Trading to review the services provided by debt management companies, thereby highlighting any potentially underhand practices utilised, such as undeclared management fees added to the total amount owed in debts.

Furthermore to the OFT’s proposed action regarding minimum compliance issues within the debt management sector, the Ministry of Justice are also in the process of consultation over the potential implementation of formal regulations or specific codes of practice for the industry. Both of these measures are proposed so as to ensure that consumers in vulnerable positions are suitably protected from poor and dishonest business conduct.

This move is anticipated to be welcomed by both consumer groups and reputable businesses in the debt management sector alike. Experts in the debt advice sector have long recognised that there has been a significant lack of regulatory practices to ensure the highest level of service for susceptible individuals in financial difficulty.

It is important to note that, at present, there are around 150 debt management firms established within the United Kingdom, the majority of which perform debt management services and honestly and successfully negotiate debt repayments with creditors. It is a welcome sign for individuals with personal debt that in the last eighteen months the OFT have efficiently dealt with 24 firms that have been failing to comply with minimum standards of practice.

Reputable companies will typically encourage individuals approaching them with debt problems to explore the different debt solutions available to them, such as IVAs in order to best suit any potential arrangement to the individual’s circumstances.

This article was composed by David Brown on behalf of IVA.net – a website that provides free, no-obligation tools, guides and information on debt solutions and matters of financial health.