Warning on rogue debt management firms

30 November 2009 | By Natalie Thomas

Promise Debt Solutions says it is vital for brokers to research the debt management companies they are referring their clients to, in order to avoid problems such as overcharging or lack of service.

Steve Walker, group managing director at Promise Debt Solutions, says that there are several points brokers need to be aware of when choosing a referral partner for debt management cases.

He says that while it is normal to charge one to two months of the client’s disposable income as an initial fee, there are some firms which are charging fees of between three and six months disposable income.

He has also heard of cases where the client’s disposable income has been miscalculated and overstated by as much as double the actual amount.

Walker calculates that some clients could be paying as much as £3,000 over the odds for debt management services.

He says: “We are hearing from consumers, where no negotiation is taking place with their creditors and they are effectively left on their own, deeper in debt, having paid large initial fees.”

Walker says not all companies behave in this way, but adds that brokers should be wary of some new entrants to the sector offering attractive trail commissions but not delivering the service promised.

He adds: “Brokers should be mindful that setting up a flashy website and offering great commissions is easy.

“Delivering on the promises is another matter.”

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