"Debt management companies that negotiate with lenders on behalf of borrowers in exchange for a fee could become regulated by the government, which launched a consultation on the issue today.
The companies set up debt management plans designed to reduce monthly repayments for borrowers, but these can be expensive over the long-term after fees are added to the repayments.
Debt advice charities have long expressed concern about some companies operating within the burgeoning debt management sector.
The number of such companies has ballooned from 40 in 1999 to over 150 now and it is estimated that between 100,000 and 150,000 people enter debt management schemes each year.
A recent review of the sector by debt charity Money Advice Trust concluded that the advice given by these companies was mixed and that the Office of Fair Trading should require them to be clear about the cost of their services when they promote them.
It found some customers were only told the levels of fees very late in the process, leaving them feeling they were in a worse financial position than before they contacted such companies.
"If you are in unmanageable debt you need to get advice on the full range of options available," said Beccy Boden Wilks of the Money Advice Trust.
"Often these companies only sell debt management plans or consolidated loans whereas you may be better off taking another route such as bankruptcy."
The consultation is expected to conclude in December and the government will announce its conclusions early next year. Options being considered include regulation or an industry code of practice"
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