Where to Find Personal Debt Advice

For many people, juggling debts is just a part of life. Re-mortgaging, transferring credit card balances from one zero rate introductory offer to another, robbing Peter to pay Paul. This might be sustained for years but, with little margin for error, it does not take much for the barely manageable to become unmanageable. In the current financial climate - with banks recalling loans, withdrawing mortgage offers and seeking emergency funding from the Bank of England - debt is front page news.

Regulation for Debt Agencies

Currently almost anyone can set themselves up as a debt adviser. Debt agencies are not regulated by the Financial Services Authority. All they need is to obtain an Office of Fair Trading (OFT) Consumer Credit Licence. The OFT makes few checks on the competency of applicants to give debt advice and applications are usually processed within 25 working days. If a debt adviser intends to charge for their services they will have to pay a fee - £285 for a sole trader or £485 for a partnership, company or organisation. The Licence is valid for five years.

As at February 2008 there were said to be 125,000 Consumer Credit Licence holders. From April 2008 the OFT will be obliged to subject new and existing Licence holders to a much higher level of scrutiny. However, it is not yet clear how this scrutiny will be applied to existing licence holders.

Paying for Debt Advice

Debt agencies will usually help their clients prepare a breakdown of all their income, expenditure and debts. They will often calculate a pro rata payment for each creditor based on the client's available income and then correspond with creditors on the client's behalf, offering to make monthly payments. It is not uncommon for debt agencies to charge considerable fees for their services.

A recent Radio 4 investigation into this subject gave the example of a woman with considerable debts who was charged an upfront fee of £1400 by a debt agency and then £53 per month - £43 per month went to the debt agency with the remaining £10 being apportioned to her many creditors. The woman was advised to ignore letters from creditors and ultimately ended up with County Court Judgments being entered against her. The advice she was given was simply wrong as a matter of law and fact. Needless to say, the money she paid to the debt agency - much of which was borrowed from friends and family - could have been far more usefully paid to her creditors.

Free Debt Advice

Although some organisations who charge for their services may give good advice, there seems little point paying for something when it can be obtained free elsewhere - especially if lack of money is the very problem on which advice is being sought. There are many organisations, both local and national, who can give excellent and accurate debt advice at no charge. The free debt counselling services should all be able to help with preparing a budget and negotiating with creditors. Three of the largest providers of free and independent debt advice are:

Citizens Advice Bureau (CAB) - A registered charity which offers free advice on a number of issues, CAB excels on debt and housing matters. They can help prepare a financial budget, negotiate with creditors, give advice on any court proceedings and provide advice on any state benefits to which people may be entitled. Advice is usually given in person or over the telephone. The CAB website is extremely comprehensive and is a good starting point for people worried about debt issues. CAB is the largest provider of free debt advice in the country.

National Debtline - Free and confidential advice given over the telephone. National Debtline is run by the Money Advice Trust (MAT) a charity formed in 1991 to increase the quality and availability of free, independent debt advice. The MAT is funded by the government and by a wide range of banks and finance companies. Calls to the Debtline are free and confidential - callers' numbers are not displayed and callers do not have to give any personal details.

Consumer Credit Counselling Service (CCCS) - A registered charity which provides free advice on budgeting and the sensible use of credit, as well as on debt. Advice is provided through a free telephone helpline, online or in person. Anonymous counselling can be given online. The CCCS's goal is to help people avoid getting into debt in the first place, and to help them arrive at a sensible and manageable repayment plan if they are in debt.

Demand for free debt advice is very high and it may not always be possible to get an appointment immediately. People should ensure that they seek advice as soon as they realise they are in difficulties - not when the bailiffs are knocking at the door.