Debt Resolution Forum expresses views on the recent report by Lloyds and Money Advice Group on fee charging debt advice.
• Consumers should have clear, informed choice
• One in five people who consider a free debt plan choose a fee-charger
• 97% of people who leave DRF member’s plans are aware of free advice.
Trade association for fee-charging debt solutions companies, the Debt Resolution Forum, today (Thursday 8 November), commented on research issued earlier this week by the Money Advice Trust (MAT) and Lloyds Banking Group (Lloyds), which showed that 50 per cent of clients of fee-charging debt management plans were unaware of sources of free debt advice.
Commenting, DRF chairman and CEO of ClearDebt, David Mond, said:
“The Lloyds Banking Group/Money Advice Trust research findings dovetail nicely with research undertaken by DRF. We have the classic glass half full, glass half empty worldview going on here: Some marketplace realities and some additional independent research adds detail that makes the picture look quite different.
Debt solutions companies that are members of DRF are obliged to make potential clients aware of the availability of free advice. It’s our belief that most of those who are unaware of free sources are people who have gone to non-compliant debt companies.
We welcome the comments from Joanne Elson, chair of MAT, that “We have long held the belief that, whilst people should be free to pay for debt advice if they choose, that decision should only be made from a truly informed position”. This is precisely DRF’s position”.
Independent research commissioned by the DRF from the borrowers’ co-operative Zero-credit shows that a fifth of people actively consult free advice agencies or are in free debt plans before approaching a DRF member and that 97% of clients who dropped out of DRF members’ debt management plans before completion were aware of free services before they started those plans. People who enter debt plans with companies who subscribe to high standards, training and independent monitoring are aware that they had the choice to go to a free provider and chose to pay instead.
The DRF’s research also showed that a third of people who leave DRF members’ plans early do so because they feel empowered to manage their own repayments, demonstrating that effective support from fee charging debt solutions companies achieves sustainable outcomes and helps create financial capability.
The DRF believes that the root of the problem exposed by the MAT/Lloyds research is the fact that around 90% of companies that hold debt management Consumer Credit Licenses are outside trade associations like the DRF. Non-compliance such as this would be exposed by the rigorous independent annual inspections required of DRF members.
The DRF welcomes the research and supports efforts to ensure consumers can make an informed choice; however, it isn’t right to say that all debt solutions companies are the same – consumers can choose to pay for advice from compliant companies who work hard to help them reduce their debt.
DRF thought it unusual that the research referred to in MAT’s press release had not yet been published and looked forward to receiving a full copy of the report.