Debt companies shouldn’t offer Quidco cashback

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.

Usually I’m a fan of cashback sites. I’ve used Greasypalm and Quidco myself to get a cheaper deal on car insurance, electricity and other purchases.

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

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Sophie Gilbert says:

30 June 2011

I agree that it is wrong to offer a £25 incentive to people struggling with their finances, especially since a hunch told me before I read it 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.” How do we stop this from happening though?

Tom says:

From reading the article the problem lies in debt management services not the marketing techniques devised to sign people up. To someone in a difficult financial position, a cash incentive may be just as effective as some carefully written advertising copy on an aggregate site in terms of conversion (if the marketer/copywriter is good at what they do). The job of the marketer is to position these products where the target audience looking. Wether cash is offered or not is irrelevant, the customer would still have been actively seeking for debt solutions in order to find quidco and the offer and would most likely have signed up irrespective of the offer. Quidco are just the aggregator here with a cashback conversion method. It’s like blaming google for allowing debt management companies appear in their search rankings.

Paul says:

Martyn – there are big financial self labelled impartial sites out there online that make money through affiliate links also. Should those advertisers be prevented from commercial legitimate deals because they may not be in the best interests of the consumer? Where are you drawing the line?

Martin says:

Paul is absolutely correct. Greasypalm, Quidco, etc are the good guys. They are paying out revenue to their members that would normally be collected as profit by other organisations from online advertising/affiliate links. The affiliate revenue paid back to members is in line with the equivalent transactions at other financial providers, “big ticket” online purchases, etc.

John Symons says:

I thought I was voting, not commenting. The answer is No to any cashback intended to lure someone into paying a much larger fee

Martyn Saville says:

Thanks for your comments everyone, but I think a few people are missing my point.

Do people really visit cashback websites looking for a debt management plan (or IVA etc), or are they looking for cashback on other products and services, possibly as a means out of immediate debt woes? The cashback sites I’ve looked at don’t list debt solutions as a separate category, but rather mix the debt listings in with vanilla products like credit cards and savings.

What I’m worried about is that people will start thinking about debt solutions (a good thing), but won’t step back to consider the alternatives to commercial debt management firms (a bad thing). The instant offer of £25 to someone who is struggling with debt may well lead them to take the ‘jam today’ approach, at the expense of their long-term finances.

It’s no secret that I think consumers should never use a commercial debt management company – there are better free alternatives available through CCCS, Payplan etc. At the very least, cashback sites should include a note that fees are payable for debt solutions from these sponsoring companies – if they’re happy to show the upside, they should be transparent with consumers over the true cost and potential damage to your credit file and your wallet.

Without analysing the data I can’t comment on why users are looking at these sites. I appreciate your comments that they might be looking for ways out of debt or different products entirely – but they drive traffic and that is the reason why they’re there. The quesion is, why are consumers trawling these sites for debt solutions? If there are alternatives why don’t they know about them? Sadly it’s the inadequacies of the alternatives which if the reason for the existence of these businesses.
I agree that warning should be provided, in the same way that investments now have the “you could end up with less than you invested” caviat, promitions for debt management services should do the same and that should be campaigned for. For the sake of transparency, I don’t work for one of these businesses but I do work in online marketing.

TerryLeeds says:

7 July 2011

It’s an interesting point, why do people look at these sites. Well I believe they are desperate for a “fix” a solution to their debt. Just the name of the Company or web site and professional look of the sites may be enough. The voluntary or not for profit sector have established reputations, however those in debt just can’t believe the likes of CCCS or Payplan exist. I know that CCCS don’t advertise as most of their traffic comes from recommendations etc. I think it’s just plain wrong to want to profit from referring a friend in debt to a firm that’s going to need to recoup that cash from someone that is obviously struggling with their finances !

andy says:

6 July 2011

I was offered 50gbp to sign up to a company-plus another 50gbp to refer somebody else;this is not only wrong,I think it should be illegal-also after 6 months I would receive another 50gbp.

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