Are “free” debt management companies really free? - There has been a lot of bad press recently regarding fee-charging debt management companies. Many well respected figures have claimed that consumers would be better off by signing up to one of the “free” debt management organisations such as CCCS, Payplan or Debt Free Direct. |
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You are here: DIME Home > Business > Are “free” debt management companies really free?
There has been a lot of bad press recently regarding fee-charging debt management companies. Many well respected figures have claimed that consumers would be better off by signing up to one of the “free” debt management organisations such as CCCS, Payplan or Debt Free Direct.
Author: Mike Robertson
Date: Nov 30, 2009 - 3:20:03 AM
We all know that you can’t get
something for nothing. That being the case, research shows that the
credit industry is made up of the people you owe money to (your
creditors). These creditors pay large sums of money into funds for
“Free” debt management companies. The Money Advice Trust have
written a handy list of all the creditors that pay into these funds.
The list includes names such as Barclaycard, HBOS, MBNA and Northern
Rock. Yes, that’s right – the free debt management companies are
funded by the people you owe money to!
Fee charging debt
management companies such as MRA Debt
Help , Gregory Pennington or Abacus are funded by you, the
client. This means that MRA Debt Help will work for you – not the
creditors. MRA Debt Help are focused on getting the best possible
outcome for our clients. You really matter to us, we will work
tirelessly to ensure that your creditors agree to the offer of
payment that you can afford. We negotiate your financial situation
with the creditor to make sure that you can get your life back on
track.
Free debt management companies may not necessarily want
to ‘rock the boat’ with your creditors when they are negotiating
your lower monthly payments. The amount of funding received by them
from the credit industry represents a serious conflict of interest
that could see clients being offered less of a discount than with a
fee charging company.
Independent fee charging debt management
companies can offer clients services, which would seem alien to a
free debt management company. Our debt counsellors will negotiate
lower monthly repayments and early settlement figures to get you out
of debt as quickly as possible. It is not in the creditor’s best
interest for a free debt management company to negotiate early
settlement figures of 40-50%!
Don’t be fooled by the
charitable status of many free debt management companies. Becoming a
registered charity offers some enviable tax benefits, as well as
giving the impression of being a morally sound company.
An
MRA Debt Help client will typically pay 1.756% of their debt per year
in fees. A typical MRA client will potentially pay off their debt
after 3 years!
Our debt counselling negotiators aim to have
all interest and charges set aside on outstanding accounts, which can
lead to clients being in a position to potentially offer a full and
final settlement of the full debt within two to three years. These
settlement figures can be as low as 40% of the current balance –
and some have been even lower than that!
MRA Debt Help have
written a handy comparison between fee charging and free debt
management companies to show you how much you could save. For
more detail about Debt
Help here.
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