Throughout 2011 and into 2012 Debt Management Today has conducted a number of In Profile interviews with various figures in the debt industry in an effort to get their views on some of the biggest issues of the day. We thought we’d take this opportunity to take a look through our archive in order to determine some of the overriding issues in the sector and what people in the know really think needs to be done to continue raising the standards of debt management...
Biggest issues
Changing the public perception of debt management is something that interviewees, including Rehan Ahmed, flagged as a continuing problem. He said: “The media don't necessarily help the image of insolvency practices. Most of the mainstream media will publish articles which show the industry in a bad light where the practice charges thousands in fees and left nothing for the creditors by way of a dividend.
“It puts clients on a back foot from two angles: firstly the client already has the image that any insolvency advice or service is going to be extortionately expensive and, secondly, many people think this is all a sham and they don't want to be involved.”
Emma Bryn-Jones, of Zero-Credit, highlighted trust as a major issue: “The technology to spam and scam is immense and the accountability for such actions negligible, not least when the regulators are between a rock and a hard place with cuts to public spending.
“Any debt advice or resolution provider who wants to retain consumer confidence needs to communicate transparency, integrity and respect for others who operate fairly - whether fee-charging or free. The return on investment will be long-term, but after at least a decade of unprecedented growth in consumer credit, we need to look at the bigger picture.”
Charles Greed, of In Control Debt Solutions, explained that issues include: “Poor standards of advice, inconsistency of fees charged, an ineffective and underfunded regulator, inconsistency in delivering compliance across the industry, lack of training and too many rogue traders who are still able to continue duping vulnerable individuals with the promise of debt write-off or immunity from debt collection.”
The Debt Advisor’s Bev Budsworth told us that one thing she predicts is quite a lot of consolidation occurring over the next couple of years: “The industry is somewhat saturated – there are a LOT of service providers.”
She added, “The OFT jumped into action a couple of years ago and really went through the industry and cleaned it up. In the long-term, I think regulators will get tougher with regard to compliance, but from my perspective that’s definitely not something I think service providers should fear.”
Things to change
We also asked numerous industry members what they would change about the sector if they could. Nick Pearson of the Paymex Group highlighted a couple of points that bother him: “I’d like creditors to make their customers aware that if they are going to pay for debt advice they should always go to a DEMSA member. The reality is that many people in debt will choose to pay for debt advice and creditors need to steer these people to reputable firms rather than allowing them to take their chances on a Google search.”
As someone who has sat on both sides of the fence (he worked for 27 years in the free-to client sector) Nick felt strongly that he “would like to see even closer working relationships between free and fee charging debt advice providers as this will benefit clients.”
Indeed Melanie Giles, of the Association of Professional Debt Solutions Intermediaries, highlighted the good work done by both sectors. “APDSI encourages its members to know about the full spectrum of debt solutions, and we ensure that our members are correctly educated on the differences between the commercial and free sectors in order that they are able to signpost solutions of choice.
“The fee vs. free debate should not detract from consumers or small business owners need to obtain often immediate debt relief – and there is much good work done in both sectors.”
Future plans
Most of the individuals we have been speaking to highlighted regulation as a key issue in the market. The OFT’s soon-to-be-released updated Debt Management Guidance has stirred numerous debates in the debt arena – something which many of our interviewees highlighted.
Fairpoint Group’s Michael Fitch said: “I think in the next 12 months we will still see a lot of activity regarding the way in which the OFT wants the industry to be regulated and how that is done. When things are a little clearer it is likely more people will exit the market and there will be five - ten ‘main’ providers left who will all have similar compliance, fees and set up.
“It will then be down to the way in which those businesses deal with their clients to set them apart from the rest. In this industry ‘less’ could actually be ‘more’ – there are so many people in the market that not all are members of DEMSA or DRF which makes it difficult for the OFT to ‘manage’. When there are fewer providers, it will give them the ability to control the industry.”
Talking to such a broad spectrum of individuals obviously produces a wide range of differing views. However, some common themes have emerged, including a belief that increased regulation (as the OFT focuses more heavily on the industry) will encourage more compliance within companies, more work needs to be done to change the public perception of debt management and that, despite best efforts, a minority of rogue traders continue to bring the industry into disrepute.
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