Do all debt management companies charge fees?

There are broadly two types of Debt Management companies:

• Fee-paying – which is where you will have an amount taken out of your monthly payment before it is passed onto your creditors (usually between 10% and 15% of your monthly payment). You may also be expected to pay 100% of your first month’s payment to the company managing your debt.
• Non-fee paying – this is where 100% of your monthly payment is passed on to your creditors to pay towards your debts. The reason some Debt Management companies are able offer this service for free is that they have long-standing arrangements with creditors, which agree to ‘fund’ them in return for managing the process. It’s important to note that this funding is a wholly separate transaction and does not in any way affect your payments. The creditors are effectively agreeing to receive less back in order to pay the Debt Management company a fee.

There are arguments for both models; proponents of the fee-charging model (most debt management companies) will say they provide better service and that the advice given by non-fee-charging organisations is likely to be biased towards Debt Management due to the way they are funded.

Debt Advice Foundation does not receive direct creditor funding for Debt Management Plans but we do believe non-fee-charging is always better than fee-charging Debt Management. This way, you can be sure that the advice you’re receiving is impartial and that 100% of your payment is going to pay off your debt.

You can read more about Debt Management and whether it is suitable for your situation in our Debt Management section.

Debt Advice Foundation is a registered UK charity offering free, confidential support and advice on any aspect of debt, including Debt Management. If you need to talk to someone about Debt Management or would like to discuss the alternatives, please call to speak to an adviser.