Consolidating debt is risky business
On the surface debt management businesses seem like a good deal. The prospect of cleaning up your financial matters in one fell swoop is an enticing one and to many people with various financial problems this seems like a gift from heaven.
But there’s a pretty substantial kicker.
Most of these services charge significant upfront fees for services you can actually do for free. And the Australian Securities and Investment Commission is warning consumers.
Where can I get better advice for free?
In the ASIC report, there’s a strong case for seeking free financial advice rather than falling for the false promises of a dodgy debt consolidation firm. As ASIC points out, “there is no uniform regulatory framework for debt management firms and barriers to entry are low or non-existent".
"Where consumers go to debt management firms, it is important they understand what they are getting and how much it will cost, so they can decide if it's worth it," said ASIC Deputy Chairman Peter Kell. "It is hard to find information about fees and they tend to be high, front-loaded, and not refunded if the promise isn't delivered. The promise is always more prominent than the price."
What is already available for free?
- You can access your credit report and challenge an incorrect listing at no cost.
- Seek help from financial counsellors or community legal services.
- Use an independent ombudsman scheme to help resolve disputes.
- Enter a hardship program and negotiate a timeframe to pay back your debts.
Related links:
10 extremely charitable celebrities
The story behind the world’s first ATM
5 tips to find a good charity to help out