Regulating a Quick Fix for Debt Problems

Abstract

The financial fallout from COVID-19 has left many individuals with increasing levels of debt. Studies reveal a greater vulnerability to promises of a quick fix for debt problems when anxiety levels run high over prospects of financial ruin. At the same time, businesses that offer to help resolve problems of unmanageable debt for a fee have been found to pose a significant risk to consumers. The article considers the regulation of debt management firms in the countries that have made significant strides in this burgeoning field, drawing lessons from their experiences. It highlights the key features of regulatory frameworks that contribute to better outcomes for consumers, while revealing the gaps that have allowed predatory businesses to avoid regulation. Specific strategies developed to mitigate risks of consumers being channeled towards unsuitable and unaffordable arrangements provide useful examples to other countries that are seeking to safeguard financially stressed consumers from harm.

Keywords: Debt, advice, consumer protection, consumer credit, credit repair