debt management companies

Debt management companies in the United Kingdom need to have a  consumer credit licence and adhere to the OFT's debt management guidance, if you join a debt management company that does not meet these criterias, then you should not be paying them a fee for debt management services.

Debt management companies will set up a debt management plan (DMP)for consumers, which is when the debt management company arranges a repayment plan with the customers creditors. The idea is that the DMP allows the consumer to pay off the debts, without getting any additional charges from the lenders. 

Originally debt management plans were set up by county courts when creditors called in a debt, the courts decided a fair amount the consumer could afford to repay each month to the lender and so a debt management plan was formed. As more and more people move into financial problems, more and more people are looking to debt management companies to arrange repayment plans for them.

Debt management companies approach the lenders with a detailed pack of information explaining things like what the consumer earns in wages, owes out in debt, spends each month and can reasonably afford to repay to each creditor per month. The debt management company then seeks to arrange a repayment plan with the lenders that is more suitable for the customers, the debt management companies will normally take a monthly fee for runnung the debt management plan. 

The Citizens Advice Bureau (CAB), National Debtline and the Consumer Credit Counselling Service (CCCS) offer a free adviosry service to people suffering from debt problems, and can help to organise debt management plans. Most other organisations will take a fee per month for providing you with a service.