ClearDebt’s Andrew Smith responds to comments made by ITN’s Chris Choi on “Britain’s Growing Debt Burden” and gives his thoughts on why the fee vs free debt advice debate isn’t black and white.

There has been a lot of coverage, in the last day or so of a report on payday loans and debt management by a committee of MPs (the House of Commons Select Committee on Business Innovation and Skills). ITN’s Consumer Editor, Chris Choi, was one of the journalists that wrote a blog on this.

Possibly unfairly, I’ve singled him out because I think the MPs’ report has already been overtaken by events and because I believe the media’s usual conclusion that free advice on debt is good advice is often not the case – and that the fee-charging debt industry is not as high risk as we are portrayed. At least, in parts (which I know is an issue that must be addressed) The OFT is on the case, supported by the debt management trade associations like DRF, and their members.

I thought a comment on Chris’s blog would give me an opportunity to put the case for fee-charging debt management but, as I write, the comment (supplied yesterday) is still in moderation – so I reproduce it here:

It’s rather more complicated, as regards debt management, than portrayed above.

First, the MPs report (I was a witness) skates over a lot of issues and does not join up the dots.

The Money Advice Service, who are now the ringmasters for consumer debt advice in the UK, say that roughly 2 million people in the UK need debt advice. Last year the free advice agencies, like Citizen’s Advice, who provide face to face debt advice, managed 100,000 interviews. So, 5% of what’s required . This year they are being challenged by Money Advice Service to do 150,000 cases. On the same funding. Pips will squeak.

Then, there’s this assumption that free advice is always good advice. Most plans from agencies like CA do not involve distributing the money you can afford to your creditors. And, MAS is advocating much more “self help” in the future. For people who often can’t help themselves? Recent research from the Royal College of Psychiatrists shows that 50% of those people who need debt advice are exhibiting symptoms of mental illness. So, one in two of all the people with debt issues, not just the most vulnerable, are unlikely to cope with self-help debt advice.

Whilst I’d be the first to agree that the fee-charging debt resolution industry has had low standards and poor behaviour . Take members of the Debt Resolution Forum (DRF): They have a code of practice that is higher than that required by the Office of Fair Trading, a 210 hour, three exam, academically accredited qualification for advisors and administrators, annual on-site inspection by a government trusted independent monitor and an independent complaints committee, with a majority of members from outside the industry.

Things will continue to change. The new guidance from the OFT, the work being done by the Insolvency Service on protocol or regulated debt management plans and the huge changes planned by MAS between now and autumn 2013 will all change the landscape hugely. But, I think that a mixed economy of free and fee-based debt advice is the only way to meet Britain’s need for educated, capable consumers who know how to manage their money.”