If you are struggling with financial problems, particularly if you are being threatened with bailiffs and Court, then it is imperative you get professional debt advice as soon as possible. However, for many people getting the correct advice quickly is often easier said than done. For many people with debt problems, Citizens Advice (CA) is usually one of the first organisations contacted. Each CA bureau is local authority funded and the access and coverage is significantly better in some geographical areas than in others. People often complain that their local CA only opens for part of the week or that there are significant waiting lists for appointments with a CA Debt Advisor. Consequently people in debt often look elsewhere to get solutions to their financial problems.

There was once a major "void" in debt advice between the governments own funded organisations and the creditors themselves. The void has now been completely filled by a huge growth in the number of commercial organisations offering consumer debt advice. In the late 1990`s there was a huge growth in the numbers of commercial Debt Management Companies (DMC) offering consumers direct access to debt advice and the promise of dealing with all creditors on a fair and equitable basis. As the DMC businesses grew they spent major sums on advertising which led the Office of Fair Trading publishing Guidelines in December 2001 to try to curb some of the more excessive claims being made for their products.

As DMC plans cannot ensure creditors stop additional interest and charges from late 2002 a growing interest started to be taken in Individual Voluntary Arrangements (IVA). An IVA automatically provides for a complete stop to additional interest and charges as well as a "debt write off" after 5 years. Within 4 years the IVA industry has now become swamped with companies offering access to these services. The competitiveness of the IVA market has again led to many excessive claims by some advertisers seeking to secure their own market share. Yet again the Office of Fair Trading (OFT) has been forced to act against some of the IVA advertisers by issuing a "Warning" in January 2007 over misleading advertisements in both the Press and Internet.

The OFT undertook a Debt advertising compliance "sweep" in November 2006 (using the 2001 DMC Guidelines as a basis) reviewing 124 National Newspaper Adverts and 57 IVA company websites. The result was that the OFT officially "warned" 17 financial management businesses offering IVAs that the OFT considered the adverts and/or websites were potentially misleading customers. Some of the advertising claims made about the amount of debt write off possible and appearing to "guarantee" a favourable outcome were deemed to absolutely wrong. The businesses identified by OFT were given until the end of February 2007 to amend their advertising and websites to properly reflect the actual possibilities of entering into an IVA.

Alan Williams. Director at OFT comments

"IVAs are still a solution for many, but [IVA Companies] supplying them must be clear and honest about what they can and cannot achieve for consumers in debt and the possible negative implications of entering into such arrangements…. We will take firm action against businesses which engage in unfair and misleading practices when promoting IVAs".

The OFT will continue to monitor the activities of commercial debt advice companies very closely; however it makes sense for someone with major debt problems to consider their options very carefully before committing themselves to a course of action. In essence a debtor should NEVER pay any upfront charges to any debt advice company - never sign a direct debit or make a payment on account. If a debt advice company is genuine in its desire to help, then getting some money upfront from someone in financial distress will NOT be necessary. There are a number of companies who do not charge any upfront fees whatsoever. Don't be duped into confusing free advice with free service - usually only the initial telephone call is free.

© Mark Hollinshead