What Is A Debt Management Plan?

Good afternoon bloggers. Now you know who I am, I want to share with you what I do and all that I know. I want to start with the basics so today I will be sharing with you what a Debt Management Plan is.

A Debt Management Plan or DMP, as you may know it, is an informal agreement between you and all of your unsecured creditors, you can think of it as kind of a gentlemans agreement. The agreement will last until all of the money that you owe has been repaid to your creditors. A DMP isn’t legally binding therefore your creditors can still apply interest and charges and they can also pursue legal action against you. The way a DMP works is that you will tell them what you earn, what you spend and what is left over at the end of the month, you will then show them what you can afford to pay them, and this is called a financial statement.

At the start of the arrangement all or your creditors will receive your financial statement which will show the offer you are making to your creditors. They can either accept this offer or not. If a creditor rejects the offer, payments will still be made to them regardless.

Once in your DMP you will send your payments in each month and this is then distributed equally amongst your creditors. By doing this, the hassle is taken away from you so all you need is to make one payment.

A DMP will last for however long it takes for you to pay your debts in full. At the start of the plan all creditors will be asked to freeze interest and charges but this cannot be guaranteed and even if they do agree to it, they could change their minds at any time; because of this a time plan cannot be made.

You will be assigned a Case Officer; this person will act as the middle man between you and your creditors. They will look after you during your plan, they will speak to all of your creditors for you and they will deal with all of the correspondence from them, so you don’t have to. You will send your payments into us each month and 100% of this will go directly to you creditors, this is because we are a free service and we do not take any fees or charges.

At the beginning of your plan we will ask each of your creditors to freeze interest and charges, whilst we cannot guaranteed that we would be successful, we have a very good relationship with creditors. The main for reason for this is because we do not take any fees ourselves so they know that they are getting all the money from you that you can afford.

Once your plan is up and running you will have constant support from your Case Officer until your debts are cleared.

We have several different departments dealing with specific area’s that can also assist you whilst in your plan. One of these being our Legal Document Handling, they help deal with any legal action that is brought against you. There are also people dedicated to helping with mortgage arrears also.

Remember Payplan offer free DMP’s. All of the money that you pay in goes to your creditors. We do not work for the creditors. We work to get you out of debt and pay your creditors back.

A lot of questions that come to us are about the surplus, people say that if they have money left over they wouldn’t need help. To calculate your surplus we calculate your basic income, so your basics wages after tax, National Insurance and any other deductions, we then calculate what you spend each month, so your mortgage or rent, utility bills, food, travel and any other costs. This will then leave you with a surplus amount; this is what is offered to the creditors and what you would pay into you DMP.

What you need to remember is that you will no longer have your creditor payments to make; they will all be included in your plan, unless you have a car on Hire Purchase or a secured loan which will be accounted for in your expenditure.

A creditor pursues legal action? We have a team of people who will deal with all of the paperwork for you. You would just need to send in the claim form and we will do all of the hard work and take the stress away from you.

My situation changes? Throughout your plan we will complete regular reviews to make sure your payments are affordable. If things do change, so will you payment.

Written by davemac on January 4th, 2011

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Posted in: Management

OFT Close 35 Debt Management Companies.

The Office of Fair Trading have released a statement announcing that 35 debt management companies have surrendered their consumer credit license and have ceased trading.

The announcement follows on from the warning they issued in September, see our earlier blog, where they ordered 129 debt management companies to start complying with them or risk losing their license.

As well as the 35 who have lost their license, a further 15 could face losing their license after further investigation.

All 129 companies were asked to submit evidence to show that they are complying with the OFT. Out of those, 79 companies submitted their evidence of which the OFT are now reviewing. Seven debt management companies did not respond to the warning and are now being investigated.

*35 debt management companies have surrendered their consumer credit license

*15 face losing their license

*8 companies have had their licenses revoked by the OFT

*7 didn’t respond and are being investigated

*Further 79 and still being reviewed.

Payplan can proudly announce that the OFT had no concerns about us.

If you have any concerns about your debt management company then contact the Office of Fair Trading. You can read their full statement here.

Don’t forget you can also follow me on Facebook and Twitter.

Written by davemac on January 31st, 2011

Filed Under  debt advice, debt help, Debt News, Financial News, Payplan   |  Trackback  |   1 Comment

Andrew F Smith says

There is another side to all this (speaking as a director of a fee-charging debt management firm and as spokesperson for one of the industry’s two trade associations (Debt Resolution Forum).

What the OFT is doing, with the assistance of most of the fee-charging debt resolution industry, is creating a sector which consumers and creditors can trust – and doing it pretty darn fast too. And – it’s going to be needed.

The OFT’s action has driven out a number of dilettantes and those who can’t be bothered to accept a burden of regulation.

The industry itself is shaping up – fast. First, the OFT’s requirement for an audit of compliance was historic – in most case it related to trading standards reviews made between autumn 2009 and spring 2010 and, for many firms, their response to the OFT was confirmatory – the changes required had already been made. So, the comment that companies were ordered to start complying in September is not strictly accurate – that is when the OFT asked for evidence of compliance: Most had fixed the problems that had been drawn to their attention months before.

Secondly, there is real commitment, from a large section of the industry, to all the regulation that’s necessary to remove consumer detriment. Debt Resolution Forum (DRF) offers an advanced BTEC (the Certificate in Debt Resolution – CertDR) requiring more than 120 hours study and with three examinations: Members have to commit to their client facing staff either taking this or being trained to an equivalent standard.

DRF requires members to go through an annual independent audit from the Insolvency Practitioner’s Association (a regulator trusted by government) and DRF has an independent complaints panel chaired by David Hawkes, NAtional Money Advice Co-ordinator of Advice UK.

It’s early days for both these initiatives but the commitment is there.

And the OFT will continue to challenge us: We’ll shortly see a consultation on new debt management guidance that will raise the bar further.

Why bother though, with all the free advice that’s available. Well first, free advice is not always best advice (but i recognise that I would say that – wouldn’t I). More to the point, the free sector has a capacity issue, they themselves say they could only deal with half the enquiries they received. Now, after Citizen’s Advice’s announcement of up to 900 redundancies, their capacity is slashed.

Then, the government’s attitude is changing. “Free” debt advice is often taxpayer funded – so not free at all. And many debtors can actually afford the fees they pay – as can (and perhaps should) their creditors. Most creditors factor the cost of defaulters into each product when they design it. So any debt recovery the banks and credit card companies make is actually bunts. Why not squeeze their margins a little and get them to share, with the debtors, the cost of debt advice and resolution? This does seem signposted by the Department of Business Innovation and Skills/Treasury call for evidence on credit and debt regulation.

So – what we are seeing is the rapid evolution of an industry sector from unregulated and seen as unhelpful to consumers to well-regulated and a required part of the UK economic scene. After all, we have an economy partly fuelled by consumer spending and you need credit to spend (nobody saves anymore). More credit means more debt.

Seems, in people’s financial lives, there is nothing certain except debt and taxes.

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Posted in: Close,Companies,Management

APDSI welcomes the updated OFT Debt Management Guidance

The Association of Professional Debt Solution Intermediaries (APDSI) has welcomed the publication of the OFT's revised Debt Management Guidance (‘Debt management (and credit repair services) guidance (OFT366rev )).

Its publication brings to an end a long period of uncertainty and allows both debt solution providers and APDSI members to take on board the changes required to comply with the guidance which can only be good for UK consumers. The changes to the guidance should also help by driving incompetent and non-compliant operators out of the market which, again, can only be good for consumers.

APDSI particularly welcomes the clarification in the main body of the guidance (section 3.3) the distinction between mainstream lead generators and those licensed businesses that ‘refer’ and ‘introduce’ clients (e.g. financial/mortgage advisers, IFAs, creditors and credit brokers) to businesses offering debt management services and Insolvency Practitioners. The OFT has stated that these differ from more specialist ‘lead generation’ since the referral or introduction is made as an adjunct to - or in support of - their main business.

The regulator uses an example of an IFA finding that his client may require specialist help with his debt problem where he may ‘refer’ or ‘introduce’ his client to a debt management business. They have confirmed the requirement for licensed businesses to hold Category E – Debt Counselling – on their Consumer Credit Licence.

The guidance also clarifies the need to be transparent in dealings with consumers where a business is not the debt solution provider (i.e. they are a debt solution intermediary). Disclosure that commission may be paid and the identity of the debt solution providers remain a requirement from the consultation document of June 2011.     

As noted in the OFT's press release, the guidance expands on previous versions, providing examples of 'unfair or improper practices' which, if engaged in, could render a business unfit to hold a consumer credit licence and operate in the market. Examples of unfair business practices include:
-    Sending unsolicited marketing text messages, email or voicemails.

-    Providing inappropriate financial incentives to staff giving debt advice, which may encourage them to promote unsuitable debt management products for personal gain.

-    Making false or misleading claims regarding the status of the business, for example operating websites which look like the website of a charity or a government body.

-    Businesses are also expected to refer consumers to not-for-profit advice organisations for further help, in certain circumstances, and to have effective measures in place to identify and deal with particularly vulnerable clients, such as those with mental capacity issues.

An overall theme of the guidance is for businesses to be transparent so that consumers have all the information necessary to make informed decisions about the most appropriate debt solutions for them given their financial circumstances.
A practice not highlighted by the OFT's press release but which, APDSI believes, the guidance makes it difficult for debt solution providers to sustain, is that of war-chesting - that is, solution providers retaining the  bulk of client funds and releasing only token payments to creditors with a view to making full and final settlement offers further down the line. If this is indeed the effect of the guidance then the association would welcome it.

On a related matter APDSI has noted the formation by the Insolvency Service of a Working Party to look at a Debt Management Protocol - APDSI believes such a move could be more effective and could be implemented more quickly and flexibly than legislation and has indicated to the Insolvency Service its willingness to contribute actively in the Working Party's discussions.

In this context, APDSI believes the industry – creditors, credit reference agencies and debt solution providers – need to revisit the Rules of Reciprocity to ensure that there is a consistency of approach (which currently there isn't) by creditors in reporting accounts which are subject to a DMP to the credit reference bureaux (i.e. Callcredit, Equifax and Experian). APDSI believes that only by achieving that level of consistency can rehabilitated clients be accurately assessed for credit going forward. APDSI welcomes the strengthening of the section on creditor obligations. 

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Posted in: APDSI,guidance,Management,updated,welcomes

Regulator publishes revised debt management guidance

The OFT has today published its revised debt management guidance detailing the standards it expects from businesses.

The guidance is the latest step in the regulator’s attempt to crackdown on those firms in the sector it believes are not meeting compliance standards.

Expanding on previous versions of the DMG, it provides examples of unfair practices which could render a business unfit to hold a consumer credit licence.

Examples of unfair practice include:

-    Sending unsolicited marketing text messages, email or voicemails.

-    Providing inappropriate financial incentives to staff giving debt advice, which may encourage them to promote unsuitable debt management products for personal gain.

-    Making false or misleading claims regarding the status of the business, for example operating websites which look like the website of a charity or a government body.

David Fisher, Director of the OFT's Consumer Credit Group, said: “This new guidance clearly sets out the standards we expect from debt management businesses. All too often it may be particularly vulnerable consumers who fall victim to poor quality debt advice and we will continue to take action against businesses that fail to follow our guidance.”

Commenting on the new guidance, David Mond, DRF chairman and CEO of debt solutions company ClearDebt, said: "We welcome this new guidance, which formalises current good practice and provides clearer and more specific guidance for debt management companies. This guidance is automatically part of DRF’s own mandatory members' code of standards – which exceeds that required by OFT.

"We believe that reputable debt resolution companies already meet and exceed these standards and DRF has robust annual inspection by the independent Insolvency Practitioners Association, in place to ensure consumers and creditors can have confidence in our members.

"DRF also applauds the recent change in OFT's procedures for examining new applications and renewals of Consumer Credit Licences. This is no longer a rubber-stamping exercise, but means that those individuals and companies that succeed in obtaining or keeping a licence will have jumped through many more hoops than before, including a much more rigorous examination of their business model, sources of leads and processes, as well as ensuring the people in the business have the right experience, skills and training. DRF has made a huge contribution to the latter, with the introduction of the 210 hour study Certificate in Debt resolution, now awarded to, or being studied for, by over 600 individuals.”

The guidance sets out its stance that businesses are also expected to refer consumers to not-for-profit advice organisations for further help, in certain circumstances, and to have effective measures in place to identify and deal with particularly vulnerable clients, such as those with mental capacity issues.

An overall theme of the guidance is for businesses to be transparent so that consumers have all the information necessary to make informed decisions about the most appropriate debt solutions for them given their financial circumstances.

David Mond added, "DRF welcomes OFT's emphasis on dealing appropriately with vulnerable people and has already piloted course in conjunction with mental health charity, MIND, to ensure DRF members' staff can identify vulnerabilities and advise appropriately.

"DRF believes that a mixed economy for debt advice is essential in the UK, where charitable debt advisors are being required to concentrate on the most vulnerable individuals and to advise around 50% more cases in 2012-13 with the same funding as last year.

"There are hundreds of thousands of people who need debt advice and can afford the fees our members charge – the cost of financial failure need not fall on the public purse. The OFT's guidance, and the work of trade associations like DRF will ensure consumers can go to a fee-charging debt resolution company in confidence that they will not be misled or their money mishandled."

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Posted in: guidance,Management,publishes,regulator,revised

Three more debt management companies disciplined by regulator

Three debt management companies have had action taken against them by the OFT as part of the regulator’s ongoing enforcement work.

David Fisher, the OFT’s Director of Consumer Credit, said: “We expect commercial debt management businesses to meet the standards that we set out in our guidance. If they do not, we will take action as we have demonstrated here.”

The regulator has revoked the licence of Prime Legal and Financial Services (PLFS), which is based in London’s Mile End, after it failed to demonstrate the necessary skills, knowledge or experience to hold a consumer credit licence and advise consumers on debt management matters. According to the supervisory body, the company did not have appropriate business practices and procedures in place.

The OFT also took action to stop Money Advice Direct Limited (MADL), also based in London, from using its existing trading name ‘The UK Insolvency Helpline’ and the proposed domain names which also include the word ‘helpline’. The OFT stated that the names fail to make it clear to consumers that the business is of a commercial nature. MADL, which retains its consumer credit licence, has appealed against the OFT's above decision to vary its licence and the refusal to grant its variation licence application.

The third debt management company which has had action taken against it by the regulator is Midlothian-based Deric Hamilton Oliver’s company – his application for a licence was rejected in part because the information he gave the OFT was false. The OFT found that Mr. Hamilton Oliver had provided debt management services even though he was aware he did not have a licence and demonstrated a serious lack of integrity which made him unfit to hold a licence.

David Fisher continued, “Revised debt management guidance, which is due to be published before the end of the year, will give even greater clarity as to the standards that the OFT expects of businesses that it licenses in this sector.”

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In Profile with Barry Mitchell of Recro Debt Management Services

We sat down with Barry Mitchell, Proprietor and Senior Consultant of Recro Debt Management Services, to find out what Recro actually stands for and what he thinks is the biggest issue in the debt industry at the moment... read more

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Posted in: Barry,Management,Mitchell,Profile,Recro,Services

Office of Fair Trading Consultation on Debt Management Guidance – ClearDebt Response

by Andrew Smith on September 7th, 2011

We’ve published, below, ClearDebt’s response to the Office of Fair Trading’s just closed consultation on new guidance for debt management companies and charities.

Those of you who also read the Debt Resolution Forum’s (DRF) response will notice many similarities.

The two documents have been principally authored by the same people and the issues are, broadly, those on which most debt resolution companies would agree  (in the case of the DRF response, the views of members have been incorporated too).

ClearDebt’s principal concerns lay in creating a level playing field between fee-charging and non fee-charging providers and also in the industry’s future freedom to market itself (ethically and transparently) on the internet. This topic is discussed in more detail in a recent article in the Daily Telegraph and in a response by our colleague and web marketing consultant, Paul Gailey which you can view here: Response to the OFT Debt Management Guidance.

The OFT consultation document can be found here.

By Andrew Smith and is filed under Government policy on debt.
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Posted in: ClearDebt,consultation,guidance,Management,Office,Response,Trading

New OFT Debt Management Guidance Makes Cases Like DCM Apex Less Likely

Debt resolution company, ClearDebt, is pleased that the OFT’s new debt management guidance, published on Tuesday June 14th June is likely to outlaw “full and final settlement” schemes such as those run by companies like DCM Apex, whose clients ClearDebt has been working with since that company went into administration on 2 March 2011.

Commenting, ClearDebt CEO, David Mond, said:

The guidance makes completely clear that it is to apply to firms offering full and final settlements and also that only in exceptional circumstances will a firm be permitted to retain clients’ funds for more than five days. Further, the guidance stipulates that a company cannot hold on to monies that should be sent to creditors unless both debtors and creditors are made fully aware of the fact and it requires client monies to be protected if the company itself goes bust.

Had these arrangements been in place before, it’s likely that many clients of companies like DCM Apex would be much better off now than they are.

The OFT guidance imposes much more detailed requirements on debt solution companies than has been the case until now. ClearDebt believes that the guidelines may force many debt management companies to throw in the towel:

The cost of compliance – both in financial terms and in more onerous business processes – will go up sharply when these guidelines are enforced.

says ClearDebt director of marketing and external affairs, Andrew Smith:

Many of our competitors, especially those that rely on cold-called leads bought from third parties, will, we believe, find it difficult to sustain their business model under these new rules.

By Marketing and is filed under Press Releases.
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Posted in: Cases,guidance,likely,makes,Management

The Daily Mirror, John Denham MP and fee-charging debt management companies

by Andrew Smith on June 22nd, 2011

Dear Tricia and John,

I read both your pieces in the Daily Mirror:

I do agree there’s no room at all for rogue debt management services – and I strongly believe that the coming 12-24 months will see the industry I work in and believe in contract to about half it’s current size – at least in terms of the number of companies trading.

That could be a disaster for debt advice in the UK, of course, because the free-to-client sector tells us they can only deal with half the demand.

But, I believe fee-chargers will be able to take up the slack and that they will do so without causing consumer detriment. Tricia, I believe we are on the brink of being fully regulated and that we will thrive as a result.

John, it was good to see you say that there are some “excellent companies out there”: I really believe that, not long from now, it will be only those companies that are left.

The industry is taking pains to be able to show consumers that we are worth our fees – with a 210 hour study, properly examined, Advanced BTEC qualification for the advisers employed by Debt Resolution Forum (DRF) members, with a truly independent complaints process and with annual independent inspection by a government trusted regulator (the Insolvency Practitioners’ Association).

Much of the advice provided by the fee-free sector just stops at advice. Good advice – but that’s all. Often clients aren’t given the robust friend they need to ensure they pay their contribution monthly and that it gets distributed to creditors. And, one can’t be sure it’s always the right advice either. In their 2010 annual report, one of the largest free sector organisations, which advises people at every income level, says that it advises Individual Voluntary Arrangements – a really good deal for creditors and debtors who are suitable – in about seven per cent of cases. That ‘s probably three or four times lower than it should be.

….40 minutes or so on the phone. Roughly half our well-trained advisors time is spent giving good advice for which we will never charge a penny.

Oh – and the advice? Clients sometimes can’t get that either from the free sector. The same organisation’s report says it only offers advice at time of first call to 25% of enquirers. Face to face advice offered by services like CAB is unable to deliver the volumes that are necessary, and, in any case, people with debt problems often need multiple sessions in order to understand their own situation.  Almost all fee-chargers offer this call for free to all their enquirers – and it usually represents 40 minutes or so on the phone. Roughly half our well-trained and yes, well-paid, advisors time is spent giving good advice for which we will never charge a penny.

You both mentioned the OFT found 129 firms in breach with action being taken against 54. And that they didn’t name and shame. I agree – there is a dilemma here, but many breaches were minor – a significant number had already been corrected and, as in every other sector in which they work, the OFT consider revealing names to be a presumption of guilt – and everyone is allowed a fair hearing, right?

Well – I think there will be many more who do lose their licences or who are required to change the way they work and that will be a good thing. But there are also many (take DRF members for instance) who are committed to fairness, transparency and high standards.

Now,  John, I have to take you up on your politics too. You say that Labour left the Tories with the opportunity to act as a result of your 2009 consultation.

If this is the Ministry of Justice consultation on regulated debt management plans then, I believe, it was completed in 2009 and it was a Labour ministerial decision NOT to publish: I may be wrong – but I don’t think I am. It’s now, I’m led to believe, with the Insolvency Service and, I think, likely to form part of a consultation later this year that has a chance of radically changing the landscape for debt solutions. So, the effort’s not wasted. Credit where credit’s due too: The OFT’s new debt management guidance published last week was a result of work almost all of which was done while the last Labour Government was in office.

I absolutely agree with John that simply providing guidance on money isn’t the way to go: time and time again we see debtors situations go from bad to worse if all they get is guidance or advice.

People with debt problems need solutions as well as advice.

Some debtors can afford to pay and there is no reason why creditors shouldn’t pay in almost every case (after all, having priced their products on the basis that they have a good inkling of the proportion that will fail to repay, any return the banks and credit card companies get from debt collection is bunts).

The ultimate disappearance of the OFT is, by the way, probably a good thing for the tighter regulation of the debt resolution sector. Under the Financial Conduct Authority (or whatever it’s called today) we’ll fall under a rules based regime that will make compliance even more central to the way we work than it is today.

For many, the fee-charging debt resolution sector provides good advice and well-managed solutions. Well managed companies in the sector should be working more closely with the publicly funded and creditor funded organisations.

Without us, many would simply go unadvised and more would get good advice, but no real debt help. A move to funding the Money Advice Service might see that get worse.

By Andrew Smith and is filed under Government policy on debt.
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Posted in: Companies,Daily,Denham,feecharging,Management,Mirror

Threatening debt management company loses licence

Tuesday 5th July 2011

The licence of debt management company Parkgate UK Limited has been revoked by the Office of Fair Trading (OFT) after the company sent a threatening letter to a debt collection agency.

The letter contained a threat of physical violence if the agency attempted to collect the debts of one of Parkgate’s clients.

OFT Director of Consumer Credit, David Fisher, said: “Threatening behaviour is unacceptable. The letter Parkgate sent was inappropriate and called into question the company’s fitness to hold a licence.”

Parkgate apologised for sending the threatening letter and said that it did not intend to act on the threat. The company’s licence was nevertheless revoked after the OFT concluded that the letter, combined with the company’s failings to demonstrate the skills and knowledge required to run a consumer credit business, meant that Parkgate was unfit to hold a licence.

 David Fisher continued, “We will not tolerate behaviour of this kind as it is a clear breach of the standards we expect from licensed businesses. We have therefore taken the decision to revoke its licence.”

Director at Atlantic Financial Management, Kevin Still, commented: “We welcome the on-going actions taken by the OFT during the consultation period on the updated Debt Management and Debt Collection guidance notes. It is important to establish professional standards between debt advisers/debt managers and the creditors and their collection agents.

“The updated guidance includes provisions for creditor obligations and the recent updates to the Lending Code and Debt Collection guidance should mean that negotiating with creditors and their agents using industry recognised protocols like the Common Financial Statement should become more widespread. As a Debt Managers Standards Association (DEMSA) member we are subject to a Code of Conduct and it is important that commercial debt solution providers conduct themselves in a highly professional manner.”

The OFT determined to revoke the company’s consumer credit licence on May 23 2011, allowing Parkgate a period to appeal. The period has now lapsed, and the company’s licence has been revoked. 

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APDSI welcomes updated OFT debt management guidance

Yesterday the OFT published its revised debt management guidelines, as part of its ongoing effort to increase transparency and ensure that those seeking advice receive the best and most appropriate service possible.

The guidance update follows a review of compliance in the sector which found, amongst other things, widespread problems with misleading advertising and the quality of advice given in the fee charging sector. Together with targeted OFT enforcement, the revised guidance is designed to address the issues identified by the review.The Association of Professional Debt Solutions Intermediaries (APDSI) has welcomed the guidance, as it makes clear the responsibilities of debt management companies to apply due diligence in business dealings both with intermediaries and directly with clients. “We believe the proposals can only be good for consumers and good for the industry” said Alasdair Warwood, Secretary General of APDSI.He continued: “APDSI, as the representative body for those wishing to introduce their clients to professional and responsible debt solution providers, is keen to see the development of a market which meets the OFT’s objectives. Namely, introducers and brokers should be fully transparent about the service on offer and fees charged; explain to consumers both the risks and benefits of each proposed solution; not use misleading names or advertising, including misleading web-based adverts, and they should ensure that the advice provided is in customers' best interests.“We do however have one or two concerns about areas where we believe the guidance could be stronger and we shall be raising these with the OFT over the course of the consultation.”Among the concerns felt by the APDSI was the fact that the new guidelines do little to limit the scope for ‘hybrids’, which may lead to a conflict of interest when an introducer or broker is offering both debt management and claims management or when offering debt management and full and final settlements. APDSI is also worried that the Revised Guidance still allows for holding back client monies to provide full and final settlements, which can only worsen a client’s credit record. Plus, there is no requirement for independent audit to ensure that client monies are held in a ring-fenced account not accessible to the debt management company - although this is already a condition of DEMSA (Debt Management Services Association) membership. The Association expressed their feelings that “given the spate of collapses over the last year”, more guidance over the handling of client’s money should be a “vital consumer protection measure”.Alasdair Warwood concluded: “These latest OFT actions clearly signal the increase in regulation for the protection of consumers facing severe financial difficulties which has to be a good thing. There is a clear desire from the reputable companies in the market to be able to offer consumers the best possible advice and support and APDSI will help intermediaries achieve this, whilst continuing to be able to operate profitably.”
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Posted in: APDSI,guidance,Management,updated,welcomes

Former US TV star Larry Wilcox completes debt management course

Larry Wilcox, the former star of US TV show CHiPs, has this week completed a finance and debt management course as part of his bankruptcy agreement.

Wilcox is best known for his starring role on the American television action drama series CHiPs, which ran from September 1977 to June 1983. He played Officer Jon Baker alongside Eric Estrada in the role of Officer Francis “Ponch” Poncherello.

The entertainment news website TMZ reported that Wilcox, who has also been a producer and a businessman as well as an actor, was ordered to go on the personal financial management course by a judge as part of his bankruptcy. The aim was to teach the former TV actor how to manage his money properly and hopefully avoid further debt problems in the future.

Wilcox’s money troubles came to light after he pleaded guilty to securities fraud conspiracy in November 2010. Around this time, Wilcox filed for bankruptcy due to debt problems reportedly totalling $1.5 million (£1 million).

He was sentenced in January 2011 to three years’ probation for creating a bogus company in order to generate fake stock sales, and he was also ordered to complete 500 hours of unpaid community service.

As part of the bankruptcy agreement, it was reported that Wilcox’s wife of more than 25 years, Marlene Wilcox, was ordered to complete the two week debt and money management course alongside her husband. The couple completed the course on Monday 13th July, 2011.

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Posted in: completes,course,former,Larry,Management,Wilcox

Worrying debt management problems reported in Worcester

The Consumer Credit Counselling Service (CCCS) has released figures which show that hundreds of people in Worcester are in serious need of debt help, with the average person owing nearly £20,000 in 2010.

The debt problems in Worcester were highlighted after the CCCS came across records showing that a total of 396 people from the city and surrounding areas contacted debt help services last year. This represents a considerable rise of 24 per cent in the last couple of years. The charity also released a Debt View map, which highlighted the levels of personal debt in each area.

On average, people in Worcester have debt problems totalling £19,832 (in unsecured debt), which is a little higher than the national average of £19,338. Commenting on this alarming figure, the CCCS’s Delroy Corinaldi said:

“I am very concerned, not only by the high levels of debt we are seeing in Worcester, but also by the continuing squeeze on household budgets that is making it increasingly difficult for debtors to repay what they owe.”

Another problem for the people of Worcester is the pending closure of the money-lending credit union Black Pear, which many locals relied on as an alternative to other, more risky forms of lending. The chairman of Black Pear, Clifford Hobbs, said:

“We stopped giving loans about two months ago and we are just about to hand over to the financial services compensation scheme.

“I think it might get worse for people on low incomes because the credit union was an alternative to doorstep lenders.”

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Posted in: Management,problems,reported,Worcester,Worrying

DEMSA condemns dubious debt management companies

The Debt Management Standards Association (DEMSA) has slammed rogue traders following a BBC investigation which broke the news that some debt management companies have been holding on to clients’ money rather than paying it to creditors.

Michael Land, Chairman of the DEMSA, advised any customer seeking to use a debt management company to look for the DEMSA and OFT logo for reassurance that they are dealing with a reputable firm which is committed to the high standards set out in the DEMSA Code of Conduct. Mr Land said: “DEMSA condemns in the strongest terms these completely unacceptable practices and we support the OFT in taking tough action against these rogue firms in the debt settlement industry.” Under the terms of the OFT debt management guidance notes, any monies held on behalf of consumers must be kept in a client account not usable by the firm for the purposes of its own business. Kevin Still, director at Atlantic Financial Management, said: “As DEMSA’s most recent member, Atlantic Financial Management has joined at a crucial stage in the evolution of the debt solution market, where consumer’s require absolute confidence in the providers they use to obtain all-round debt advice and, if appropriate, a managed debt solution. This must include demonstrable evidence that their paid funds are held in a client account and promptly distributed to their creditors. Monthly statements are a minimum requirement.“Consumer education needs to be improved with the regard to some of the so called ‘hybrid’ operators that are not genuine Debt Management Companies, where funds are not disbursed to creditors, but instead a ‘war chest’ is built up by the provider to offer debt settlement offers to the client’s creditors. We are hopeful that the updated OFT Debt Management Guidance will highlight unacceptable practices and those that can cause consumer detriment.”DEMSA is the only trade body in the sector to have received approval of its code under the OFT’s Consumer Codes Approval Scheme. As the principal trade body in the sector it works closely with the OFT to help promote high standards in the industry. Membership of DEMSA is reliant upon debt management companies being able to demonstrate that they comply with the standards set out in the DEMSA Code of Conduct. All members are subject to ongoing stringent checks to ensure they adhere to the both the Code and OFT guidance. Mr Land added: “DEMSA ensures that all its member firms have safeguards in place to protect the consumer. All member firms have to keep customers’ money ring fenced in trust accounts and provide a compliance certificate that they are maintained satisfactorily by a chartered accountant. Firms belonging to DEMSA must also pass on clients’ payments to the consumers within five working days.” 
Manchester debt firm is liquidated owing creditors over £2.2m
Wednesday 11th August 2010

Bankrupt football legend probed by police over loan fraud
Monday 2nd August 2010

Mortgage broker ordered to repay £1.5m of client money used to pay off debts
Wednesday 14th July 2010

Barclays lifts lid on banking write-offs
Wednesday 20th February 2008

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Posted in: Companies,condemns,DEMSA,dubious,Management

Horrors of axed debt management companies emerge

In a recent report by the BBC, the true extent of the foul practices of two recently closed debt management firms has come to light.

In a bid to highlight the extremity of the firms’ crimes, the BBC portrayed the experiences of a couple who fell victim to Global Debt Solutions’ malpractice.The Murphy couple told the BBC that after fearing that mounting debt could lead to their house being repossessed, they accepted Global Solutions’ offer to arrange a repayment plan for £40,000 of credit card debt and loans. The Murphy’s later learned though that their creditors were not being repaid and had taken legal action against the couple. Global Solutions, later known as 3 Step Finance, have now been shut down by the Insolvency Service, who found the company had failed to monitor payments effectively. Since this closure, which took place last June, the industry has also seen Apex Debt Counselling & Management, which held back clients’ money after going out of business, forced into closure. Alasdair Warwood, Secretary General of the Association of Professional Debt Solution Intermediaries (APDSI), said: “The spate of collapses of debt management companies over the last year has demonstrated that there have been significant breaches of the OFT's Debt Management Guidance (OFT366)  - specifically the requirement to ring fence client funds and the requirement to disburse client funds within five working days of receipt of cleared funds. Both customers and intermediaries - who may themselves be at risk if they introduce clients to non-compliant DMCs - are entitled to expect that licensed DMCs are complying fully with OFT366.”As it currently stands, the funds of debt management firms’ clients are likely to be lost completely if the firm is closed down and the funds are not in protected accounts. The OFT has ‘promised’ to crackdown on non compliant firms, but one year since Global Solutions ceased trading many industry professionals feel that the situation is little improved. Alasdair Warwood added: “With the publication of  revised Debt Management Guidance due to go out to consultation this June, APDSI will be urging the OFT to take pro-active steps to ensure that these aspects of their guidance are being complied with. APDSi, for its part, will need to be satisfied, and will be urging its members to satisfy themselves that any DMC that applies for membership or any DMC they deal with meets these requirements of the Guidance. “Consumers should also satisfy themselves that any DMC they deal with meets these requirements whether by being members of a trade association such as DEMSA with OFT code approval or by seeking direct confirmation from their DMC."The voice being projected from well-established and fully compliant debt management firms is also one that is firmly in favour of change. Kevin Still, Director of DEMSA member Atlantic Financial Services, said: “Whilst the commentary regarding to Global Debt Solutions (also known as 3 Step Finance) dates back to June 2010, the message remains clear that consumers need confidence in the debt solution providers they choose and being a member of a trade association like DEMSA is one way for firms such as ours to offer this peace of mind. “Members of the Debt Managers Standards Association (DEMSA) have signed up to a code that promotes consumers’ interests beyond the basic requirements of the law. Companies like Atlantic that display the DEMSA/OFT Approved code logo will offer you reliable customer service, which includes the use of a client account to protect funds. These funds will be promptly disbursed to creditors and the client will receive a monthly statement showing how their creditors have been paid in accordance with the OFT Debt Management Guidance. We welcome the clarification that the OFT have confirmed that they will be providing in June regarding the guidance, that are due to be consulted on for a period of 3 months.”
Manchester debt firm is liquidated owing creditors over £2.2m
Wednesday 11th August 2010

Bankrupt football legend probed by police over loan fraud
Monday 2nd August 2010

Mortgage broker ordered to repay £1.5m of client money used to pay off debts
Wednesday 14th July 2010

Barclays lifts lid on banking write-offs
Wednesday 20th February 2008

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Posted in: Companies,emerge,Horrors,Management

Working in the debt management industry

A temporary ClearDebt and Abacus employee, Olivia Roberts, shares her views on working in the debt management industry.

Many people presume debt management companies are a waste of time – just cowboys out to rip people off who have already been unfortunate enough to find themselves in financial difficulty.

Before working at ClearDebt and Abacus the only parts of this industry I had experienced were the TV adverts for credit cards offering the best APR or companies lending money until payday. I was aware of the stigma attached to ‘consolidating’ debts and I have to admit I was dubious about the intentions of debt management companies. You hear so many horror stories about Joe Bloggs, the man who began his debt management plan £10,000 in debt and 2 years on owed £50,000, but thankfully during my time here I’ve learnt that things at Abacus and ClearDebt are different…

It only took a matter of days before the creditor liaison team here made me feel at home. There’s Pauline, the chain tea drinker for whom no problem is too big when she has a brew in hand. Laura, ‘the oracle’ has helped me each and every day with anything I was unsure of. She is very knowledgable on the ins and out of the debt management system and I genuinely don’t know what I would have done without her. And of course a fellow staff blogger, Creditor Liaison Team Leader Chris Brown, click here to read his blog about Lloyds TSB.

As a creditor liaison officer, I was trained on how to deal with creditors over the phone, on emails and through post – something which clients would otherwise have to do themselves. The level of contact made by creditors to our clients shocked me at first, helping me realise how stressful it must be for those who are regularly hassled about payments. For most of these people their financial situations mean the repayment amounts are just not affordable.

In the current economic climate, it’s easy to find yourself in unmanageable debt and people should not be afraid of being judged for this. After witnessing firsthand the extent of not only people’s financial difficulty but also the lack of financial education many people have, I can honestly say the debt resolution industry has been a really enlightening sector to have worked in. I saw numerous Debt Management Plans come to a close as clients paid off their debts. There is no better feeling than knowing you have been part of the company that made that possible. I can confidently say I was certainly not working for a bunch of cowboys and I’m grateful for the opportunity I was given here.

Olivia Roberts

By Marketing and is filed under Inside ClearDebt.
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Posted in: industry,Management,working

OFT tackles noncompliant debt management companies

by Marketing on June 14th, 2011

The Office of Fair Trading (OFT) have issued today new guidelines for debt management companies. Stay tuned for ClearDebt’s coverage of the days events bringing you news of events as reported from various outlets and with reactions from social networks, right here on a special blog post.

Readers are welcome to leave comments below.

By Marketing and is filed under Government policy on debt.
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Posted in: Companies,Management,noncompliant,tackles

OFT consults Debt Management sector on CAB super-complaint

Debt management companies (DMCs) will this week have received a questionnaire from the OFT as part of its ongoing investigation into the Citizens Advice super-complaint regarding the marketing practices and fee charging of credit brokers and other service providers, including DMCs. The complaint submitted to the OFT includes suggestions of new regulations to protect consumers, but this could do more harm than good to the compliant companies providing valuable debt solutions.

Strict legislation and restrictions are of course already in place, and the majority of DMCs are compliant and strongly support the OFT in its action against rogue companies to help build consumer confidence. To enhance the existing legislation monitoring and enforcement could be strengthened to help identify non-compliant parties as early as possible in the credit brokerage, debt solutions and claims management sectors.

Vance Parsons, Director of EuroDebt Financial Services said: "In their super-complaint, Citizens Advice has suggested a number of regulatory reforms that could be made in the credit market. We feel there are sufficient regulations and advertising standards in place and that it is more a matter of the regulators using their existing powers to take action against non-compliant businesses, of which we are of course fully supportive. 

“It is important that compliant debt solution intermediaries and providers are not penalised for using legitimate marketing techniques that fall within the various advertising standards, some of which only came into force in March 2011. Clearly the worrying trend of unauthorised deductions from consumer bank accounts or credit cards, for which little or no service is provided in return, need to be dealt with as quickly as possible."

Alasdair Warwood at APDSI said: "When APDSI was established as a trade association for debt solution intermediaries in late 2010, one of our primary objectives was to look at existing marketing practices and help educate compliant and licensed businesses, typically IFAs and credit brokers, with regard to assisting people who have been identified to be in financial difficulty. 

“With restrictions on credit through the recession it is inevitable that many brokers are finding more and more clients that don't meet lending criteria, but who require a debt solution where a debt consolidation loan or re-mortgage may not be viable or in the client's best interests. Many brokers will have marketing databases where current and former clients are facing multiple interest rate rises in 2011 and a continued erosion of disposable income."

Manchester debt firm is liquidated owing creditors over £2.2m
Wednesday 11th August 2010

Bankrupt football legend probed by police over loan fraud
Monday 2nd August 2010

Mortgage broker ordered to repay £1.5m of client money used to pay off debts
Wednesday 14th July 2010

Barclays lifts lid on banking write-offs
Wednesday 20th February 2008

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Posted in: consults,Management,sector,supercomplaint

Debt resolution we ARE, debt management we are NOT!

A debt resolution company which made headlines in last week’s DMT newsletter has hit back at claims that they work in ‘debt management’.

First Step Finance (FSF) claims it is frequently mistaken for a ‘debt management’ company, which has presented the firm with a number of challenges. FSF is currently subject to a review of its Consumer Credit License, which was instigated in December 2010. The company is fully co-operating and engaged with the OFT during the review process. The OFT raised a number of points which FSF claim are non-debt management issues, and un-related to the OFT Debt Management Guidance Review in September which saw 129 firms threatened with losing their consumer credit licenses.Ahmad Butt, Legal Director at FSF, said: “The Debt Resolution Forum (“DRF”) have been very supportive in giving guidance where none had been given prior to joining DRF and a detailed and independent audit by the Insolvency Practitioners Association has recently taken place on our systems and processes.”FSF is un-associated with the large number of traditional debt management companies that the OFT took action against in its review last year, and the company is a keen advocate of the review into practices and standards of conduct with the aim of removing rogue, non-compliant companies.  Managing Director Christine Whitehurst said: “The company remains committed to always working in the best interests of our clients, to resolve their financial difficulties, observing high professional standards and best practice guidelines whilst proactively improving the efficiency and effectiveness of our service to create sustainable growth.”Unlike traditional ‘debt management’ companies that simply manage consumers presenting debts with their respective creditors, FSF actively assists its clients to resolve their debt difficulties in the ‘shortest possible time’ (typically 12 to 36 months), focused upon their clients individual personal circumstances through its unique approach.  FSF was established in 2007 and claims to have saved its clients millions of pounds and disbursed payments to creditors in excess of £2 million.
Manchester debt firm is liquidated owing creditors over £2.2m
Wednesday 11th August 2010

Bankrupt football legend probed by police over loan fraud
Monday 2nd August 2010

Mortgage broker ordered to repay £1.5m of client money used to pay off debts
Wednesday 14th July 2010

Barclays lifts lid on banking write-offs
Wednesday 20th February 2008

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Posted in: Management,resolution

Apex Debt Counselling and Management Limited – In Administration

by Nazma Noor on March 15th, 2011

Good news for worried clients of Apex Debt Counselling & Management Limited – which recently went into administration: ClearDebt Group plc is working with the administrators, HJS Recovery, to review the situation of every active Apex client who wishes it and to offer to continue their current debt management plan (DMP) for them, free of charge.

Apex DCM clients should contact ClearDebt immediately on this dedicated number 0800 612 3318 or by emailing apexenquiries@cleardebt.co.uk for free file review. ClearDebt will ensure clients are made aware of all their options and, should a debt management plan be the most appropriate solution, ClearDebt will waive all the fees normally charged on such arrangements to ensure debts are cleared in the shortest possible time. This plan will be entirely free of charge.

Due to work we did earlier in the year (which resulted in the appearance of this article in the “Crusader” column of the Daily Express), we are aware that a number of Apex clients may be better off in a different debt solution known as an Individual Voluntary Arrangement (IVA), where all interest and charges can be frozen and a significant proportion of debts written off, usually over five years. We will be assessing Apex clients circumstances with this in mind and will advise if this appears to be the best. If an Apex client chooses this route IVA fees will be chargeable but these will make no difference to the monthly payment you can afford, as long as you complete the IVA.

ClearDebt will not pressure you to accept our advice – the decision will always be yours. Our advisors are aware of the situation in which Apex DCM clients find themselves in and are available to speak to you from 8.00 am to 9.00 pm Monday to Thursday, and from 8.00 am to 5.30 pm on Friday.

Apex DCM customers who decide not to move to ClearDebt need do nothing. The consequences will be that their creditors will become aware that their plan has ceased when no more payments are received from Apex on your behalf. They will contact you and you will need to come to repayment arrangements with them individually, or choose another debt management supplier.

Should you decide to use ClearDebt and should creditors contact you direct for payment we will, of course, deal with this for you. We are here to help you towards a debt-free future.

Apex DCM customers should note that ClearDebt Group plc, or any of our member companies, agents or representatives have had absolutely nothing to do with the prior conduct of any plan held with Apex prior to 2 March 2011 and cannot advise you on any matters that took place before this date. Nor can we advise on any matters arising from the current administration of Apex however clients should note that any payments made since 3 March 2011 should be recoverable from the joint administrators, who are currently formulating proposals which will be sent to clients in due course. The administrators will not be making any payments to the creditors of debtors in Apex DCM debt management plans.

By Nazma Noor and is filed under Inside ClearDebt.
Tagged with: Apex DCM.
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Posted in: Administration,Counselling,Limited,Management