Debt Settlement Scams

The ongoing cost of the credit crunch on the business, society and financial world has developed into a clear situation in the last few months; mostly because a lot of well acknowledged companies and trademark names have become recent victims of the decline in the economic economic environment that has gripped the UK and the rest of the world.

Finding trustwhorthy debt advice

Several debt advice companies have emerged in response to the difficult situation at the present at the same time as many people find themselves struggling with mortgage repayments and unemployment.

In these hard economic times many consumers are turning to debt advice agencies to help them with repayments of loans and mortgages as well as other debts such as credit cards and overdrafts.

But it would appear that the public wishes to be equally careful when choosing who to go for help and guidance; as the Office of Fair Trading (OFT) has taken action this week against 13 companies running a total of 27 websites offering debt advice; writing to them and instructing them to close down.

These debt management companies appear to be false to the consumer by using website addresses that are similar to non-profit organisations such as the Consumer Credit Counselling Service, the Money Advice Trust and Citizens Advice.

There is a danger with increasing unemployment, further people could run into financial difficulty and a trully professional debt service should be concerned that at the point where the public is most vulnerable and seeking advice, they are being intentionally misled by people who are trying to gain a commercial advantage from them.

Debt management companies

The debt management company act as an intermediary between you and all of the people that you owe money to (your creditors). A debt management company will make contact with your creditors and try to settle or negotiate with them on your behalf. The objective is to agree more reasonable monthly payments as well as concessions such as a freeze on interest where possible.

If the negotiation with your creditors are sucesfull the debt management company distributes your (lower) contribution towards your debt between all of them.

Finding out if debt management is a decent selection can be a tricky business, because some firms offering advice are funded by the banks, credit card providers and other creditors. That means they are subjective strongly by what your creditors want rather than what would be the best solution for you. Creditors would often rather see you start a Debt Management Plan than propose an IVA, for example. This is because they are likely to get more of their money back from debt management. Debt management plans do not require lenders to write off any of your debt.

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