Let's be rid of these debt advice rogues

Complaints about fee-charging debt management firms are “some of the most upsetting cases I see”, says Juliana Francis of the Financial Ombudsman Service.

Poor debt advice can leave struggling people trying to make repayments that they cannot afford. And rather than helping them, bad advice can push people into a cycle of problem debt that be almost impossible to escape.

On top of that, debt problems can lead to mental health issues, such as depression. Put together than can leave people who have responsibly done what they can to try and deal with their debt rather than walk away from it, being unfairly penalised by their own actions.

Last year the Financial Conduct Authority warned that many debt managers do not follow the rules – which leaves customers, including many vulnerable people, being treated unfairly. The City Watchdog concluded that the standard of paid-for debt advice was “unacceptably low”.

The Ombudsman’s recent experiences reflect that. “We’ve seen debt managers making false promises – such as telling people their debt will be cleared in an unrealistically short time,” says Ms Francis. “And we’ve found debt managers don’t always explain the impact that setting up a debt management arrangement will have on people’s credit file.”

She advises people to contact a free debt management service instead – such as StepChange or Citizens Advice. But earlier this month we saw 16,000 people hit when debt management firm PDHL was closed down.

With more debt managers expected to fail to get a licence to continue in business the strain on the free debt services will tell. It means they’ll need more support, warns campaigning Labour MP Yvonne Fovargue.

“The Treasury needs to ensure that free debt advisers are sufficiently funded to cope with the sudden influx of all these extra people needing help,” she told me. It’s a warning the Treasury should heed to avoid adding further woe to those trying to deal with debt.