The customers who were interviewed in depth clearly recognised they had a debt problem that they needed to resolve. Almost all of them had taken steps to try and sort out their debt problems prior to contacting a fee-charging debt management company, but with limited success at best. A few of them had already pursued other debt
remedies.
When asked in the interviews how they felt about their debt problems, almost all the participants said they were worried and upset, and anxious to find a solution. Some were embarrassed about the situation they had got into, and often felt unable to discuss it with anyone. Others talked about their debt problems making them feel physically ill.
The most common way for people to come into contact with a fee-charging debt management company was to respond to a television or newspaper advertisement for debt solutions. This was particularly the case among participants who had been recruited for the research through a large debt management company. The main attraction of the adverts for participants was that the companies offered to sort out their debt problems, and to reduce the amounts of money they were repaying to their creditors by reducing their outgoings and/or reducing interest charges.
And like they said on the advert, you know, they will give you your life back… they will give you your life back because they reduce the payments as much as they can to a minimum that you are paying the minimum that actually you can actually live. (Woman, 30s)
The fact that companies offered an alternative to a debt consolidation loan was also part of the appeal for some participants.
Participants generally responded to an advert soon after seeing it. A few waited some time before making contact. One participant, for example, waited a few weeks before making contact, to assess whether her debt problems might be alleviated by a debt consolidation loan she had recently taken out. She telephoned the debt management company when it became clear that she could not keep up with the loan repayments. Another participant put off making contact for several months because she was considering selling her buy-to-let property to clear her debts. She eventually decided to phone the debt management company when the telephone calls from her creditors became unbearable.
The internet was also an important source of information for participants. Several people came across the name of the company they contacted on the internet when they were searching for help to resolve their debt problems.68 As we saw in Chapter 3, some debt management companies acquire customers through ‘introducers’ such as loan companies.
A number of participants described how they were contacted by a fee-charging debt management company (by telephone or email) after they had filled in online
applications either for a loan or to request help with their debt problems. In addition, one participant reported that he had been telephoned by a fee-charging debt
management company completely ‘out of the blue’, and was at a loss to explain how this had come about. The telephone call did, however, prompt him to think about taking action to sort out his debt problems.
A number of participants were recommended to use a particular fee-charging debt management company by a friend or colleague who had already used the same company. Other less common methods of contact included finding a company in the Yellow Pages and getting a leaflet through the door. One couple were given the details of a fee-charging debt management company by its sister company, which provided IVAs, a route they had already tried unsuccessfully.
5.5.1 Deciding which company to use
There was very little evidence among interviewees of any ‘shopping around’ between different debt management companies before deciding which one to use. Instead, they tended to stick with the first company that they contacted (or were contacted by), for reasons that we discuss below.
Some participants, particularly those who had responded to a television advert, said they were unaware of other debt management companies at that time.69 A few internet users had chosen a company with a name familiar to them from television adverts. Other participants were too busy to contact more than one company or did not want to waste time doing so. Perhaps unsurprisingly, participants tended to stick with
companies that had been personally recommended to them.
68
Participants described using search terms such as ‘debt management’ and ‘managing finances’.
69
These participants had generally contacted a fee-charging debt management company some years ago. A number of them commented on the appreciable increase in television adverts for debt management and other companies offering debt solutions since that time.
Only a handful of participants spoke to more than one company, generally two or three at most. They tended to make their decision based on cost: the company they chose either had a lower monthly fee or there were no upfront charges. Like other participants (described in section 5.6.1), they were also swayed by their first impression of speaking to the company.
I’d been on the internet but because [company name] seemed OK and it was a bit of a lifeline really, I thought, well I’m going to go with this. (Woman, 50s)