Some firms specialising in managing peoples debt have been accused by Which? magazine of failing to meet government guidelines.

People in serious debt are desperate and vulnerable, and it's too easy for debt management companies to take advantage of that Helen Parker Which? editor

The Which? investigation found that some debt management firms failed to conduct a proper financial review of clients finances or to make the fees they charged clear to customers.

This is in direct contravention of new government rules for the debt management industry.

Debt management companies act as a go-between the customer and their creditors in return for a fee.

However, many people are unaware that debt charities offer a very similar service for nothing.

As a result, some debt management companies have been accused of exploiting vulnerable people.

Guidelines

In response, back in December 2001, the Office of Fair Trading (OFT) set out a series of guidelines for the debt management industry.

The OFT said firms should carry out a thorough review of clients financial position and be up-front about their fees.

In addition, the OFT said consumers are not to be misled into thinking that their credit rating would automatically improve when the payment of their debts was complete.

In fact, once a County Court Judgement (CCJ), one of the most common reasons for the refusal of credit, has been issued it remains on the individual's credit file for up to six years - in most instances regardless of whether the debt has been repaid.

Mystery shopped

Which? mystery shopped seven debt management firms and found that all of them breached at least one of the OFT guidelines.

"The debt management industry is showing a shocking contempt for the OFT's standards," said Which? editor Helen Parker.

"People in serious debt are desperate and vulnerable, and it's too easy for debt management companies to take advantage of that."