Debt management companies may have cash to throw at glossy adverts during The Jeremy Kyle Show, but why on earth do people use them for a service that’s available free, more suitable and much better elsewhere?
Over the weekend I popped into the Co-op to buy a meat and potato pie. They said I could have a lovely fresh organic one for free, but I said no. Instead I went next door and asked if I could pay over the odds for a less tasty one.
In fact, even though I needed a meat and potato pie, I didn’t really mind when they sold me a raspberry yoghurt instead. After all, I can always pop back later and pay extra for the unappetising pie when I discover I shouldn’t have bought the yoghurt in the first place.
Sounds like the Monty Python version of a Victoria Wood sketch, doesn’t it? Why would anyone pay for something that is available free, more suitable and frankly much better elsewhere?
And yet this is the question I find myself asking over and over again when people ask where they should go for debt advice. My answer is always the same – you can get free and independent help from the Consumer Credit Counselling Service, National Debtline and Citizens Advice.
Why go to commercial debt companies?
So I’m left wondering – why do people still respond to commercial debt management companies’ (DMC) adverts on daytime TV? Is it the friendly, non-judgmental tone of the adverts or the promise of a quick-fix? Or do people just not realise the charges involved?
Research by both the Office of Fair Trading and Which? has unveiled a long list of reasons to avoid debt management companies. These include: poor advice; high fees and charges; a lack of effective regulation; commission-led sales; and in some cases, the risk that your repayments will never reach your creditors.
And there’s no guarantee you’ll be sold the most appropriate debt solution for your circumstances anyway. About eight in 10 people entering an Individual Voluntary Arrangement (IVA) have already been through at least one other debt solution. And after a debt company has already received your money for a debt management plan, which in many cases proves to be unsuitable, turning you into an IVA can maximise its profits even further.
This type of tactic by commercial debt companies is just like selling a pie-hungry customer a raspberry yoghurt, as they know you’ll be back to pay extra for the meat and potato pie you could have got for free. Or maybe I’m missing something?