LEGISLATION to prevent “unscrupulous cowboy operators” in the debt management industry taking advantage of vulnerable customers has been accepted in principle by the Government.

The Fianna Fáil legislation to regulate debt management advisers, who offer advice on a person’s credit or debt, would subject them to regulation by the Central Bank and require them to be authorised by it.

Fianna Fáil public sector reform spokesman Seán Fleming introduced the Regulation of Debt Management Advisers Bill in the Dáil last night. He said it would require advisers to set out advice on all fees “at the point of engagement” and would inform all potential clients “of the services offered by the Money Advice and Budgeting Service”, a similar service although it does not offer cash management of clients’ money.

Minister of State for Small Business John Perry said the objectives of the Bill would be examined by the Minister for Finance and taken into account in committee stage amendments of legislation currently before the House.

The Central Bank (Supervision and Enforcement) Bill will now include provisions to regulate debt advice, budgeting and management firms.

Mr Fleming said Fianna Fáil “is bringing this legislation before the Dáil to put the spotlight on a sector which has mushroomed in recent times but remains unregulated”. Lack of regulation resulted in consumers’ money being put at unnecessary risk. “Vulnerable customers are being taken advantage of by some unscrupulous cowboy operators,” he said.

Debt management advisers would be prohibited from handling clients’ money themselves. He said many distressed borrowers signed up to seemingly attractive offers but “subsequently found themselves in further financial trouble and in a less secure situation than when they started. Often fees of €750 were common, along with 15 per cent monthly commission on the debt going to a creditor.”

He said it was “ironic that people who helped broker deals with some of the more expensive mortgage companies and having made commission on day one and getting people into big debt are now coming back as the cavalry to try to rescue the situation and charge the same people . . . to help to manage the debt”.

Fianna Fáil justice spokesman Dara Calleary said the legislation, if debated at committee stage, “would send out the signal that we’re not going to tolerate cowboy or wild west behaviour”.