Debt management third parties could be regulated in the future
The UK government has now clicked onto the fact that an increase in third-party debt management companies from 40 in 1999 to 150 today has revealed something of a gap in the regulatory system. Currently debt management companies are able to negotiate with borrowers on behalf of their customers, in exchange for a fee, looking to consolidate loans and stretch their payment periods over a longer distance.
It is estimated that between 100,000 and 150,000 people have entered such debt management schemes over the last few years and are currently paying significantly more than the original debt over a longer period. There is concern that various commissions and management fees instigated by these debt management companies with the borrowers are adding significantly more debt to the deal. As a consequence, many customers will be paying back their consolidate debt for many years to come and may be unaware of the impact that commissions and fees are having.
While it would be wrong to suggest that all companies in this particular area of the market have taken advantage of their customer's situations, there is no doubt that some unscrupulous third-party debt management companies are raking off significant income.
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