These informal arrangements with creditors which are operated by an increasing number of firms, some of which have charitable status, are coming under increasing scrutiny. Concern is being expressed in more and more quarters because debtors are being ‘encouraged’ both by the debt management company and, indeed, by the lenders, to enter into open-ended agreements where other – usually formal – forms of insolvency procedures would be more appropriate. Could it be for the fees charged, we wonder??
Another concern we, and indeed, other reputable advisors have, is that lenders appear to be somewhat unwilling to deal with anyone but their own, particular, favourite Debt Management Company. It may be, of course, that they ‘fund’ that particular company, but maybe we are just slightly cynical….
It would be extremely interesting to have an actual figure for the ‘toxic’ debt currently being serviced by debtors making minimum payments against tens of thousands of pounds of debt in Debt Management Programmes. These programmes are, of course, favoured by the banks and credit card companies as, on their internal accounts, they are ‘live’ debts and make their balance sheets appear healthier than they actually are. In reality, of course, few of these debtors are ever going to repay the debts in full (unless they live to be 249 years old!!!!)