Debt Free Direct
Debt Free Direct Review : DebtFreeDirect is one of the UK’s largest debt advice companies and is the leading IVA provider in the UK. The Lancashire-based company was founded in 1997 by Lathams Chartered Accountants and was bought out by management in 2001. The company went public in 2002 and is now listed as one of the Top 50 AIM companies.
They offer free debt advice to consumers, based on a “Best Advice” theory. This means that they will analyze your financial situation and recommend the best solution for your particular circumstances. They provide a free phone line at 0800 093 3617. Possible solutions they consider include debt consolidation loans, selfh elp or informal debt help, re-mortgages, debt management plans and IVAs. They are a major IVA provider, with a market share of over 20% of UK IVAs. They handled over 600 IVAs in January 2006 alone, a substantial increase from January 2005 with 260 IVAs. They engage in heavy advertising in newspapers, magazines and television. Andrew Redmond, CEO of DebtFreeDirect, wrote “Awareness of the IVA is growing through advertising. Our penetration of the market is set to treble over the forthcoming year”.
There has been criticism of mass advertising by debt advice companies. Malcolm Hulston, chairman of CCCS, a nonprofit credit advice organization says “Ads which appear regularly in our newspapers frequently claim to offer debt advice when in fact, they are in the business of arranging IVAs which are only appropriate to a relatively small number of people in certain circumstances.” One complaint against DebtFreeDirect was filed with the Advertising Standards Association in November, 2005. The complaint stated the ad was misleading to consumers. The complaint was upheld as being unclear and DebtFreeDirect were advised to reword the advertisement.
It is still debatable whether the huge increase in IVAs is due to actual or perceived need. The record levels of unsecured consumer debt in the UK contribute to financial difficulties, but there are options other than IVAs. However, IVAs are being heavily promoted to consumers and it seems to be working. According to DebtFreeDirect, 51% of its callers are advised to take out an IVA . while nonprofit Consumer Credit Counseling Services recommended IVAs for less than 4% of their clients. There is growing concern that rising numbers of IVAs may affect bad debt levels, which are also soaring.
In the first 6 months of 2006, the UK’s top 5 banks reported bad debt levels of over the banks are concerned that more consumers are “walking away from their debts, encouraged by companies that exploit IVAs and bagging bumper profits for themselves.”They may or may not charge an upfront fee for setting up the agreement. Be sure to ask for details on costs and fees from any company you are considering doing business with. DebtFreeDirect does not charge any upfront fees, all fees are deducted from your monthly payments and the balance is sent to creditors. There are typically fees for setting up the arrangement and continuing supervisory fees for the period of the IVA, usually 5 years.
In recent times a whole industry has sprung up around insolvency. This has centered on management of IVAs. DebtFreeDirect was definitely a company in the right place at the right time. Their profit increased 177% for the year ending April 2006, and 38% of direct profit was from supervisory fees on IVAs. They had over 5500 IVA cases at this time and the price of their shares rose from 140 in April of 2005 to 431 in April of 2006. There are several charity or nonprofit organizations that provide debt advice and answers for no charge. Citizens Advice Bureau, National Debtline and Consumers Credit Counseling Services are all confidential and free services. Myvesta is another consumer advice service, which can also arrange IVAs.
Due to tremendously increased consumer demand, the government is expanding the CCCS and National Debtline programs, as part of the Over-indebtedness Action Plan. They have committed 51 million of funding to increase public financial awareness and provide financial education. Consumer education and debt counseling is definitely needed, as consumer debt in the UK averages over 8500 per household (excluding mortgages). In one survey by the Financial Services Authority, 29% of people aged16-24 had no idea of how to manage a weekly budget, and 62% couldn’t name an organization or service that provided debt advice.
