Payplan’s call for statutory regulation of the debt advice sector has faced opposition from the industry.
John Fairhurst, managing director of Payplan, says apart from concern about the lack of oversight on the financial stability of debt solutions companies, his main worry is the amount that clients are being charged.
He says: “There is a lot of evidence that inappropriate advice is resulting in customers being unable to afford repayments to debt management plans and then being suckered into further plans which also stand no chance of getting them out of debt.
“I hope that this government will recognise the importance of ensuring proper oversight and, having seen the failure of self-regulation in the mortgage market, ensures that this politically easier option being touted by some industry bodies is dismissed in favour of proper and independent regulation.”
But Nick Pearson, director of external affairs at Paymex Group, says statutory regulation is not a panacea and robust self-regulation is exactly what is needed.
He says: “Pensions and endowments were regulated and we still saw widespread mis-selling. What we need is robust self-regulation to protect consumers.
Pearson adds that there are two steps to take – firstly firms should be required to get an Office of Fair Trading licence.
And secondly, it should be compulsory for all providers to go through rigorous checks by the Debt Managers Standards Association.
He adds: “The best firms have the checks but as they are optional, some do not.”