Unscrupulous debt management schemes could face closure under Government proposals (By Bieke Demeester)

I read an article in the Telegraph about very high rates of interest in the United Kingdom. As everyone know, more and more people have problems to pay their debts. A debtor often makes a ‘debt management scheme’, which is an informal payment schedule between him and his creditors. This prevents a new loan or a formal insolvency procedure.
The British government will introduce soon a legislation which lays down rules for these schemes and for the companies which apply high rates of interest and charges, and really hassle the debtors for payment. Such companies can be fined or even shut down! The basic assumption is that debtors end up in a vicious circle of developing more and more debts, especially because the interest rates and charges are very high. With this intended legislation, the government wants to protect the debtors.
I think this regulation is necessary because if there aren’t any rules, people just can’t stand up against unscrupulous practices of certain companies. But I think the main problem is the possibility to buy on credit in certain companies. In that way, people buy expensive goods, which they sometimes can’t pay back.
In the public social assistance centre where I worked, I faced the same problem as described in the newspaper: debtors came to me with more debts, coming from high rates of interest, notices to pay, summons etc.

Sources:
Butterworth, M. (2009). Unscrupulous debt management schemes could face closure under Government proposals. Retrieved from http://www.telegraph.co.uk/finance/personalfinance/6206152/Unscrupulous-debt-management-schemes-could-face-closure-under-Government-proposals.html

Dept management scheme. Retrieved from http://www.personaldebtsolutions.co.uk/solutions-debt-management.htm