There are hundreds of debt management companies in the UK. It is important to understand what they can do for you before deciding to use one.
Some companies offer their services free of charge, others will charge. Of course, it is wise only to borrow money if you can be certain you will be able to pay it back.
Unfortunately, borrowing does not always go to plan.
Individuals can find themselves unable to repay their debts after a change in circumstances. Or even worse, find themselves in a debt spiral.
Often, people use credit in desperate times when they cannot see any alternative.
If people struggle to repay debt, there are debt management companies UK residents can go to.
What can a debt management company do?
Debt management companies provide services and various levels of support for worried individuals. Also they can take greater control of your finances by looking after what people owe.
Many people turn to these companies when they do not know how to proceed. Or they are feeling scared and drained as a result of owing money.
They might be struggling with managing their debt because they owe to various creditors. Therefore knowing how to prioritise debts and reduce the owed amount is a skill in itself.
Debt management companies can help with:
- Management Plans (DMPs),
- Debt Relief Orders (DROs),
- Individual Voluntary Agreements (IVAs)
and bankruptcy, amongst other options for taking control of financial problems.
Debt management companies UK: the 5 biggest names
There are many fee-charging providers of debt management services. These companies may charge an up-front fee or incorporate fees into any monthly payments.
Creditors may not be happy to work with these companies. Because the debtor will be paying for admin that could get spent on clearing debt.
The biggest debt management companies are those that do not charge fees. Instead they work on a not-for-profit charitable basis. These are:
StepChange is debt charity that provides advice, support and debt management services.
You can use StepChange’s Debt Remedy to discover which solution is likely to best meet your needs. Taking into account factors like the amount of debt and current income and expenditure.
You must provide a detailed budget, and you do not have to commit to the first solution. StepChange also runs a UK helpline, available to call on 0800 138 1111.
In 2015, more than 220,000 people used StepChange’s Debt Remedy solution. This option enables people to begin taking action to resolve debt worries at any time of the day or night.
From August 2016 StepChange’s reviews showed they had a 99% service rating, and a score of 4.9 stars.
Reviewers have said,
“it was a weight off my shoulder, I had been carrying it around for many years. Wish I’d approached them sooner”.
The testimonials received by StepChange back up a message given to those in difficulty. It is important to act and seek advice as soon as possible if you are struggling to manage your debt.
National Debtline is the registered charity that runs the My Money Steps website. The works like StepChange’s Debt Remedy. Running through a 20-minute online questionnaire and providing details about your debt. It will help to find the best way to tackle it.
The main National Debtline website features online chat. And there is also a UK telephone helpline available on 0808 808 4000. Debt gets handled in a different way in Scotland. National Debtline runs a Scottish edition website.
With free debt advice and management services, PayPlan runs a helpline. Their number is 0800 280 2816.
Like other debt management companies, UK based PayPlan deals with creditors on your behalf. PayPlan assigns clients with case officers and access to an online portal.
PayPlan does not operate an online service to recommend which option is best. Instead, you will speak to an advisor over the phone.
From August 2016, PayPlan had a rating of 5.8/10 on independent review website TrustPilot. On Review Centre, their rating was 4.3/5. Negative reviews suggested clients received more than one case officer, rather than dedicated.
There were suggestions PayPlan had tightened their DMP criteria. Clients got contacted about their Debt Management Plans getting cancelled during as a result.
Positive reviews speak of the feeling of relief:
“When I could see a future, I broke down and cried tears of profound relief”.
Debt Advice Foundation
The Debt Advice Foundation is a registered charity focusing on providing education and information. Yet, they do not provide online financial reviews. Instead, they run a debt management service through their telephone helpline.
Anyone that is struggling to manage their debt can call the Debt Advice Foundation on 0800 043 40 50. Also they can offer advice about the most suitable way for each person to tackle their debt.
The Debt Counsellors Charitable Trust provides a telephone debt helpline on 0300 456 2726.
Their website does not operate any form of online help service. You can email to arrange a phone call, providing a summary of your debt status up front to speed up the process.
Debt Counsellors can help with a wide range of debt solutions including DMPs and IVAs. Also, full and final settlements, administration orders and income maximisation.
The Money Advice Service
The Money Advice Service is not a debt management company. But is a government launched service providing free and impartial money advice. People struggling with debt get asked to visit the Money Advice Service website first.
Web chat and telephone helpline services are also available. The telephone helpline is 0800 138 7777.
Debt management companies – UK regulation
Providers of debt management services must get regulated by the Financial Conduct Authority. The FCA ensures that the provider, either charitable or fee-charging, meets certain standards. Complaints can get handled by the Financial Ombudsman.
Debt management companies must be transparent about any fees and charges. They cannot mislead and must explain the risks involved with any service they offer.
Providers of debt management services can choose to become members of DEMSA. DEMSA is the Debt Managers Standards Association and is a trade association. It audits members to ensure that they follow a strict code of conduct.
Membership of DEMSA is optional but provides extra peace of mind for potential customers. Fee-charging debt management companies with DEMSA membership include ClearStart, Debt Release Direct and MoneyPlus.
Like DEMSA membership, the DMP protocol was optional but could provide extra reassurance. The Money Advice Service website lists the DMP providers that complied with DMP Protocol.
Debt Management Plan – FCA Regulation
Since the debt management industry regulation, providers have stopped this service. But, The Money Advice Service Website operates a list of DMP providers that were not authorised by the FCA.
The Consumer Credit Register lists companies currently authorised to provide DMPs. With permission until FCA reviews get completed. Some currently authorised companies may lose their authorisation during this interim period.
Is it necessary to use a debt management company?
Debt management companies understand the laws surrounding debt and have pre-existing connections with creditors. Also they are impartial and not involved with the stress of a situation and provide a valuable service. Especially for people struggling with personal debts.
Some debtors use debt management companies to take control on their behalf. They communicate with creditors and manage repayments, but there is no legal need to do so.
You can speak to any company you owe money to and can ask them to consider taking a lower monthly repayment. Whether dealing with creditors or working with a debt management company. It is possible to find letter templates online, to help you to deal with your own debt management. If you are looking to take more formal action, you must speak to an impartial advisor.
Many people turn to debt management companies when facing problems.
A debt management company will help you to examine your income and expenditure. Also, produce a realistic budget and find the solution that best meets your needs. Yet this may be an informal Debt Management Plan.
A debt management company can deal with creditors on your behalf. They use existing relationships and an understanding of your rights and responsibilities. This can take a weight off your shoulder.
Debt management companies must be FCA authorised and regulated. Some choose to be members of the Debt Managers Standards Association. Which has an extra code of conduct.
There are many fee charging companies. There are also charitable debt management companies that do not charge fees. These include:
- National Debtline
- The Debt Advice Foundation
- Debt Counsellors
Debt management companies provide advice and information online, as well as running telephone helplines.
StepChange’s Debt Remedy and National Debtline’s My Money Steps website are two such services. You will need to have details about your debts, your income and your expenditure to hand. Alternatively, Helpful Hector is not a debt management company and is not authorised for debt counselling, but can directly connect you with a debt solutions provider and help you start on the path to becoming debt free.
The earlier you acknowledge your financial difficulty, the sooner it can get dealt with.