A report into payday loans and debt management companies has been published today by the House of Commons Business, Innovation and Skills Committee. (BIS)
The report details areas of concern with regards to payday loan and debt management companies and contains recommendations for Government action.
Citing a November 2011 Personal Debt Snapshot report by R3, the insolvency trade body, that details the extent of consumer worries over debt, the BIS report raises the following concerns about debt management companies:
- The Government must work to phase out up-front fees – the provision of guidance on this point by the OFT is inadequate.
- The Government introduce the necessary regulations to ensure companies publish the cost of their debt advice and their outcomes, if an agreement cannot be reached during discussions with the industry.
- The Government should establish effective auditing of Debt Management Companies’ client accounts.
Committee chair, Adrian Bailey MP states:
Greater transparency in the commercial debt advice market will benefit consumers hugely.
The Committee feels that voluntary codes of practice are highly unlikely to achieve this aim.
The Government must be prepared to regulate if consumers are to receive the protection and the level of information they require.
The BIS report also covers the regulation of debt advice, the Money Advice Service, and payday loan companies and includes statements from a panel of industry representatives including Andrew Smith, Director of Marketing & External Affairs at ClearDebt and spokesperson for the Debt Resolution Forum.