Debt management companies are offering cashback through sites like Quidco. I think it’s wrong to offer a £25 incentive to people struggling with their finances, only to charge them hundreds in debt fees.
But there’s a huge difference between an annually-renewed home insurance policy and a debt solution that could cost you hundreds of pounds – especially when better options are available for free elsewhere.
Who you approach for debt advice should be based on the quality of the service and the long-term cost, not a few quid as a reward.
Quids-in or quids-out?
As an example, taking out a debt solution with Money Advice Group through Quidco could earn you £25 in cashback. However, there’s no mention on Quidco’s site about the fees you would pay under a Money Advice Group debt management plan.
It will keep all of your first month’s repayment and then all but £1 per creditor in your second month. The company then charges a monthly fee of 17.625% of your repayment, with a minimum of £37.50. A debtor with six creditors who can afford to repay £200 a month would pay the company £769 in fees in the first year alone…
Suddenly the 25 quid you got at the beginning pales into insignificance, doesn’t it?
Get free debt advice
Commercial debt management companies never offer the best deal to consumers, even if they offer cashback. You’d be much better off using a free debt advice organisation, such as the Consumer Credit Counselling Service (CCCS) or National Debtline instead.
Una Farrell of the CCCS put it perfectly when she told me:
‘For Money Advice Group to be offering cashback on debt solutions is, I believe, a cynical way of targeting the most vulnerable debtors. The awful thing is that it will be those in the most dire of situations who will be tempted by the offer, and who will pay for debt advice that will only increase their burden.’
These cashback deals have no place on what is otherwise a great way for consumers to save money. Debt advice should be free and impartial, not a cynical marketing activity offered through cashback websites.
Should debt management companies be allowed to offer Quidco cashback?
No (81%, 113 Votes)
Don't know (12%, 17 Votes)
Yes (6%, 9 Votes)
Total Voters: 139