The Ministry of Justice has launched a consultation process on the regulation of debt management companies.

The consultation paper will explore whether intervention is needed through regulation in light of other government policies that have already been introduced to help people in debt and, if so, whether regulated schemes should be introduced and how they would work. The process will also involve studying whether tighter non-statutory regulation of current schemes would be more appropriate.

One of the premises behind the consultation is to look at how debt management schemes could be improved to yield more benefits both for debtors and creditors.

The paper: Debt Management Schemes - delivering effective and balanced solutions for debtors and creditors, seeks views from the industry on whether there would be benefits for debtors though more consistent charges. It will also explore the freezing of interest and other charges once a payment plan has been agreed and views on the opportunity to pay off debts over time without requirements to sell homes or other assets.

Protection for debtors from Enforcement procedures unless the creditor receives court permission will also be explored, along with better advice on the full range of options available to deal with debt problems.

Changes to existing schemes, if introduced, would aim to ensure creditors receive maximum returns; do not need to spend time and money chasing debts; have clients' financial details regularly provided to them in a consistent format and have confidence that they are receiving the maximum possible monthly instalment.

The consultation precedes a move by the regulator to take a closer look at compliance in the sector.

Later this year, the Office of Fair Trading (OFT) plans to launch a review of its debt management guidance to obtain a clearer picture of compliance levels within the debt management sector and take appropriate follow-up action.

It is estimated that between 100,000 and 150,000 people currently enter debt management schemes each year.

This MOJ's consultation is published in conjunction with the government response to another consultation - Administration and Enforcement Restriction Orders; setting the parameters - which looked at reforming existing measures designed to help people with multiple debt. The MOJ said it would not have been possible to implement these reforms until April 2011 at the earliest.

The consultation is to be concluded by 18th December 2009, with a response paper expected to be published by 31st March 2010.