Five questions on: Debt-management firms

They exist to help struggling people get out of debt, don't they?

You'd think. But many mislead vulnerable people into taking up the wrong sort of plans, according to a damning report from the Financial Conduct Authority (FCA) this week.

What sort of evidence did they uncover?

Firms are making people's money problems worse by selling them unsuitable products and services that make it harder to pay off debt, the watchdog said. In one extreme case, a desperate debtor was advised to use a payment plan that would have taken her 125 years to pay off.

But isn't there free advice available?

Yes there is, from a range of debt charities – but struggling people often don't know about them. Debt managers are supposed to inform them that they can get free help but many don't, with some even claiming that free services are no good. One told a customer that free advisers were "owned by the banks" and that the customer would have "to do all the work themselves".

Sounds like they're just in it for the profit. What will happen to them?

Debt-management firms are currently being assessed for full FCA authorisation, but the watchdog warned that some would be turned down if they didn't improve the way they dealt with vulnerable people. It said that firms will have to demonstrate that they meet consumer credit rules, including treating customers fairly. The FCA is also planning to assess the level of fees charged by debt management firms.

And what should struggling people do?

If you have debt problems, seek out one of the free debt charities, such as Citizens Advice, StepChange or National Debtline. Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: "Our message to anyone who is struggling with debt is simple – there is never any need to pay for advice. The best thing you can do is seek free advice from charity-run services as early as possible."