Just dug this out of the Archives. If you wait long enough, truth is recognised. It's an article I wrote for PUNCH MAGAZINE November 2001
They’ve spread like an infestation over daytime television. Unknown a few years ago, now most of the gaps between the programmes are filled with them.
They preach a new illusion that promises an end to anxiety. Worthy solid males that you’d trust with your diamonds or daughters purr reassuringly. Brainy Carol Vorderman and kindly Aunt Gloria Hunniford promise to smooth away troubles.
The promise is relief from misery of overwhelming debt. As tedious as a nagging toothache, the myth is endlessly repeated . All debts can be rolled up into a single affordable payment. Responsibility is shouldered by someone else. Thousands of those who jumped into the trap have multiplied their problems. Some have lost their homes, destroyed their marriages and faced suicide. In one recent case, a tormented debtor was jailed after setting fire to his home. He came close to ending his life and those of his family
There is no magic escape hatch from the plague that crushes millions of Britons
The average adult has a debt of a record £3,000. In the past year the U.K. debt has leapt by 12% to a massive £130 billion.
It’s not just the feckless and disorganised. Relationship break-up or divorce can half wealth and double liabilities. Illness and redundancy wreck orderly domestic budgets. Students are now conditioned to accept debt as a natural predestined feature of life. It’s in for a penny : in for a pound, or ‘In for a grand,’ : : why not ‘In for twenty’ ?
Small life changes can transform docile controllable debts to an inescapable prison of worry. The vultures circle, seeking the vulnerable. They called themselves Debt Management Companies (DMCs) With a few honourable exception such as First Plus, most DMCs almost always add to the problems of their clients.
They are new predators who feed off the adversity of others. In the past tally men, credit drapers and loan sharks profited from the poverty and ignorance of working class families. ‘ Industrial’ insurance polices were peddled door to door as a cushion against the worry of the workhouse or the pauper’s grave. All robbed their victims with were atrocious value.
DMCs continue the dingy tradition. Their technique is to agree a deal usually over the phone after a cursory review of the customers liabilities and income. Routinely they add 15% to the total debt as their. fee. Usually they then pocket the first months debt payments for themselves. Always, the total debt is increased and the period of indebtedness is lengthened.
The promise of the advert turns to ashes - debts problems become more severe. The Citizens Advice Bureaux (CABx) have recorded a heartbreaking catalogue of disillusioned customers.
A single parent in Somerset was told to pay a monthly amount of £150 to the DMC. She had a disposable income of less that £10. In Staffordshire a family were instructed to repay debts by using invalidity benefits calculated to give them a bare minimum standard of comfort. Shortly afterwards they were disqualified from benefits. A man with learning difficulties was fitted up with a £125 bill to pay from his nil income.
All should have been told to seek advice from the CABx or other non-profit free agencies. Those in receipt of means tested benefits rarely have money available to pay non priority debts after paying their essential living costs.
It’s vital that they are warned to prioritise their obligations. Many are led down the ruinous path of undertaking unaffordable obligations to repay unsecured debts while neglecting priority ones such rent or council tax arrears. Non-payment of these can lead to loss of essential services, eviction from or repossession of a home. In worst cases imprisonment is a possibility.
Not satisfied with overrunning daytime television, some companies have other dubious ways to sniff out their prey. A family in Kent was door stopped, another in Yorkshire was cold called by phone by a debt company. Both has missed recent credit card repayments. No explanation was offered on why they were targeted by the DMCs. They both suspect that news of their difficulties were leaked in return for commissions.
Another wheeze is marketed as an alternative to bankruptcy. Individual voluntary agreements (IVA) are a seductive new temptation. One firm boldly promises to write off up to 90% of clients debts in five years. The IVA bundles the debt to a reduced repayment total through an insolvency practitioner and and co-operative creditors. It sometimes works.
But zealous commission-driven over-selling is rampant. One man sought help with a £13,000 debt. Eight months after the IVA had been arranged, one creditor rejected the deal. The unfortunate man was then eight months in arrears with all his creditors The £1,200 fee has been collected by the company and further reduced his chance of clearing his spiralling debts.
One of my correspondents discovered his repayment plan was a black hole.. After paying three years fixed payments for a total debt of £21,000 he was presented with a debt statement of £26,000. That included additions for insurance and fees.
The DMC cheerfully offered more ‘help’ with the offer of a loan of £30,000. That will take him beyond retirement age to repay. This is ideal solution for the company. He would become a lifetime contributor to the DMC’s profits with a life of perpetual indebtedness. He is middle class pillar of the establishment who fears that news of his debts would wreck his career. He curses the day he sought help from the DMC
No-one needs their services. All the alternatives are safer and free. The CABx provide help from skilled staff whose advice is professionally audited. The slow emergence of Bank Basic accounts that do not allow overdrafts will help. They enforce financial caution.
Credit Unions are at last securing a foothold in the UK. Already widely used in Ireland and North America, they allow low incomes families to control their financial destinies. Saving are pooled to make loans to individual members and for community investment on a not-for -profit basis.
The worst result of DMCs advertising is that they reduce the fear of crippling debt. If it because a pain, the message goes, those nice people on the television will painlessly soothe it away. No wonder, bashing the plastic is the favourite national vice
The cavalry are coming over the hill in the shape of the Office of Fair Trading who may hamstring the DMCs with restrictive regulations. The credit trade have their own advice centre. Direct Line has pioneered warning to their customers. DMCs must be exposed and tamed. Their business is not loan consolidation. It’s debt multiplication
Debt Management Companies (Written Answer January 22nd 2003)
Paul Flynn: To ask the Secretary of State for Trade and Industry (1) what measures she plans to introduce to ensure good practice among debt management companies; 
(2) what assessment she has made of the Office of Fair Trade's guidance for debt management companies and the level of protection they offer to consumers. 
Miss Melanie Johnson: Companies providing debt management services, whether they charge or not, are required to be licensed under the Consumer Credit Act 1974. Under the Act the Director General of Fair Trading (
œDGFT) has a duty to ensure applicants for a licence are fit to engage in the activities for which they are licensed.
In December 2001 the DGFT issued guidelines to debt management companies to ensure they deal fairly and openly with consumers—the Debt Management Guidance (December 2001). A copy of the guidance can be found in the Libraries of the House.
The guidance requires that companies offering debt management services should comply with the best practice identified in it. Where the Office of Fair Trading (OFT) has evidence of practices breaching the guidelines the DGFT can take action to refuse or revoke the consumer credit licence, or take such other action as appropriate under other legislation (e.g. Unfair Terms in Consumer Contracts Regulations etc).
I am satisfied that the guidance ensures consumers a good level of protection; and I am looking forward with interest to the results of the Compliance Review which the OFT is currently undertaking.