Personal insolvencies have jumped more than 10 per cent over the past year, as people in financial difficulty sought help from debt-management firms which have been roundly criticised by key corporate regulators.

Key points: ASIC criticised the "opaque and expensive" agreements

ASIC criticised the "opaque and expensive" agreements Credit card debt accounted for almost one-quarter of 7,900 new personal insolvencies in first quarter

Credit card debt accounted for almost one-quarter of 7,900 new personal insolvencies in first quarter Companies fined, ordered to remove misleading advertising

The Australian Financial Securities Authority (AFSA) said there were 7,900 new personal insolvencies in the first three months of the year.

"This is an increase of 10.8 per cent compared to the March quarter 2016," AFSA said, noting all states and territories shared in this rise.

"Western Australia led the increase, reaching a record high of 928 personal insolvencies in March 2017, after a year-on-year increase of 197 personal insolvencies - or 26.5 per cent," ASFA noted.

The ACT recorded the largest proportional increase up 32.6 per cent over the year.

Personal insolvency agreements soar 140pc

The figures also highlight another disturbing trend in the growth of personal insolvency agreements.

While bankruptcy edged up 2.5 per cent over the year, and debt agreements rose by 20.8 per cent, the often-criticised practice personal insolvency agreements rose by almost 140 per cent over the year.

In a damning report on debt-management firms last year, the Australian Securities and Investment Commission (ASIC) found the agreements were often unsuitable for people in financial difficulties.

Debt-management arrangements typically require an establishment payment of up to $2,000 and then ongoing monthly fees.

Consumer rights group Financial Counselling Australia found it was common for 60 per cent of the money owed to be paid to creditors, while the other 40 per cent goes in fees to the debt-management firm.

ASIC found the fees and costs were opaque, making it difficult for consumers, often in significant financial hardship, to assess the cost relative to the purported value.

Fees were found to be often 'front loaded' — that is fees were payable before services were provided thereby increasing consumer commitment through sunk costs.

ASIC also noted some sales were high-pressured and little information was given about important risks.

"Some firms had a poor understanding of the relevant law and the consequences of particular strategies which may lead to unsuitable services for consumers," ASIC concluded.

ASIC crackdown forces changes to misleading ads

A crackdown on the industry by ASIC has seen companies fined and ordered to remove misleading advertising from websites this week.

The firms caught up in the action include Capital Debt Solutions, Debt Assist Australia and Bankruptcy Experts.

Most claims related to false testimonies, which could not be substantiated, and claims the agreements were "government approved" when they weren't.

"Recommendations and statements, like 'government approved' can have a strong influence when vulnerable consumers in financial hardship are seeking help with their debts," ASIC deputy chairman Peter Kell said.

"Firms must ensure their marketing materials and promotional statements are based on fact," he warned.

AFSA said the number of business-related debtors entering personal insolvency increased marginally, with economic conditions the most commonly cited cause of the issue.

The most common cause of non-business related insolvency was credit card debt, which accounted for nearly one-quarter of all new insolvencies over the quarter.