Debt firms to be undercut by debt charity

Over the past year more and more consumers in the UK have turned to IVAs in order to try and ease their debt problems.

An IVA is short for individual voluntary arrangements; each creditor agrees to accept a set repayment on the balance that you owe for a fixed period of time, which is normally five years, after which time any balance remaining on the debt is written off. With the levels of consumer debt worrying high in the UK, an increasing number of people are turning to the IVA route, fuelled and encouraged by glossy ads and assurances from a range of debt management firms.

By offering debt solutions such as these many of these debt firms are able to make huge profits from the consumer, and in some cases are failing to provide adequate information with regards to the consequences of taking this type of action. However, the Consumer Credit Counselling Service has now stated that from April of this year it will be offering its own non-for profit IVAs, undercutting some for profit debt management companies by around two thousand pounds.

Other debt management agencies, including Debt Free Direct, have suggested introducing a kitemark in relation to IVA standards. The Consumer Credit Counselling Service hopes that by offering IVAs it can force some of the high profit, unscrupulous companies out of the running, thus making it easier for consumers to find debt solutions without being charged a fortune for the privilege. The CCCS deals with around two and a quarter billion pounds worth of debt from UK consumers.

Malcolm Hurlston, the founder of the Consumer Credit Counselling Service stated: "The market needs shaking up. It has not been working efficiently for the lenders or the customers. The debt advisors have been taking too much out of the pot. Our entrance will put pressure on prices and standards".

Tom Smith
6th February 2007