The research aims to raise an alarm around struggling households facing unnecessary charges for DMPs.
The research was commissioned by Lloyds Banking Group and the Money Advice Service and conducted by the Centre for Research in Social Policy at Loughborough University.
It suggests that one in ten people who are charged from a DMP have to pay their fees up front. It argues that this advice should be banned.
The research suggests that the failure of these plans reflects the poorer practices of fee charging companies, as well as the additional cost of fee-charging plans.
Similarly, people with free DMPs were clearer about repayment levels and plan length.
Individuals with fee-charging DMPs generally had a less clear grasp of what their plans entailed.
The research also found that half of those who were being charged fees for a debt management plan were not aware that such plans could be set up for free. People struggling with debt were found to be making distressed decisions and not shopping around for the best solution.
The research stated that the absence of any objective or regulated means of comparison makes it difficult to choose between competing debt management companies.
Chief executive of the Money Advice Trust, Joanna Elson, said: “People deal with unmanageable debts in a variety of ways, but far too few people take the one step that stands the best chance of making a real difference, that is seeking free, independent advice.
When people do take the brave step of confronting their financial difficulties, we owe it to them to ensure they stand the best possible chance of finding a fair and sustainable way back to financial health.
“We have long held the belief that, whilst people should be free to pay for debt advice if they choose, that decision should only be made from a truly informed position. The research makes clear that around half of those paying for debt help are not aware of the free alternatives. In times when free, charity providers of advice are facing tight budget squeezes, whilst the marketing budgets of fee-charging debt management companies seem to grow exponentially each year, we have to be very careful that this 50 per cent figure does not grow any further.”
