Debt management companies to be scrutinised

The government is examining the current practices of debt management companies to determine if they should remain unregulated and if a code of practice should be applied.

Debt management companies arrange debts on behalf of individuals, which are consolidated and a monthly amount is paid back over a fixed period of time.

However, insolvency practitioners have previously raised concerns that as these companies are not regulated there is no governing body to keep fees charged for this service under control or if the right debt solution has been given to the individual.

The government does not want this to be seen as a crackdown on debt management companies, but wants to look at the system and to see if the best solution for debtors has been reached through this route, reported the BBC.

It is presumed officials will either leave the situation as it is, introduce a code of practice or bring the companies under a formal regulatory system.

The government is expected to make an announcement on the next course of action early next year, with the consultation ending by the end of this year.

The insolvency profession was involved in helping to set up a self-regulatory body for the debt industry, known as the Debt Resolution Forum.

Further reading:

Insolvency Practitioners' Association to regulate IVAs

Q2 insolvency stats reflect misery of UK economy