The British just can’t get enough of credit. Consumer debt in the UK stands at £1.13 trillion and continues to spiral upwards, with unsecured debt forecast to swell to more than £200 billion this year. Hundreds of consolidators and solution providers are squabbling for market share and all manner of (often inappropriate) ‘solutions’ are offered to people who can no longer service their debts. It was to address this last problem that Andy Redmond founded individual voluntary arrangement (IVA) specialist Debt Free Direct.

‘This industry does have a credibility problem,’ admits Redmond. ‘There are a lot of what I’d call “less than perfect” debt solution providers, all advertising as if they give independent advice. Often they’re only interested in selling a particular product or service, regardless of what’s in the best interests of the desperate consumer.’

What Redmond reckons he has done is develop a model that delivers the best and most ethical solution to people who find themselves in trouble. The model (of which more below) seems to be working as Debt Free Direct’s shares have leapt from 25.5p to the current 471p in the three years since it floated on AIM. Average monthly turnover has nearly doubled in the last 12 months and full-year results are predicted to see a £2.1 million pre-tax profit yield earnings per share of 5.9p.

Spotting a gap

Redmond qualified at PricewaterhouseCoopers before becoming a partner at chartered accountancy firm Lathams. It was there that he spotted the opportunity to utilise existing IVAs to help the consumer debt crisis in the UK.

‘IVAs had been around since 1986, but they were only ever used to help commercial traders get out of debt problems. So I thought, why not apply the same solution to consumers?’

Lathams was sold to the lacklustre Tenon Group in May 2001, but Redmond kept the IVA operation he’d been running in the insolvency department, eventually purchasing it through an MBO for around £5 million and setting up as Debt Free Direct. This entrepreneurial venture was far from plain sailing though. As he explains, ‘It soon became clear that I needed to standardise the advice given by designing a computer program.’

Sophisticated software solution

Redmond and his colleagues spent no less than 18 months designing, testing and tailoring algorithm-based software into which could be entered the particulars of a person’s financial circumstances and out would pop the least drastic solution to their problem. ‘It’s a computer with an insolvency brain,’ he reveals.

‘This approach was the only way to ensure that advisers in a call centre weren’t tempted to offer particular solutions motivated by a sales bonus. Otherwise, customers never know if the advice they’re getting is truly independent.’

‘We work with creditors to arrange for people to pay their debt in monthly instalments over a five-year period. We pass the payments on to the creditors while deducting our fee, so the important point is that consumers don’t pay for the service, creditors do. More importantly though, only four per cent of people who call Debt Free Direct generate revenue for us – the rest are often given free advice as to how to deal with their problem. It’s free to call us, so as you can imagine, our phone bill is horrendous!’

Beyond the corporate

Redmond’s extra curricular activities further illustrate his desire to bring a degree of order and ethics to this industry. He’s been an active lobbyist and is one of only a few industry figures included on the Government’s working party shaping the imminent Simple IVA scheme. ‘I like to get stuck in!’ he admits. ‘I’m an ideas man but I want to drive those ideas to fruition. I really believe you can make a profit in this market by being consistently ethical in the way you deal with people. It shouldn’t be about deception and taking advantage. When regulation finally comes to this industry, which it is bound to, we’ll be more than ready.’