OFT Debt Management Compliance Review
Debt Management The Right Way
Hi to all of our regular listeners ,bloggers and viewers. This weeks show highlighted the latest 129 page report which outlines the full findings of the Office of Fair Tradings report into debt management guidance compliance review.
The OFT has been doing an extensive investigation into the working practices of debt management companies here in the UK. As a result 129 companies have been given clear direction from the OFT to change their working practices or bear the consequences of having their Consumer Credit License revoked.
The report which later on within this blog we will give you a link to, states that some companies have been:
1) Trying to pass off as the Citizens Advice Bureau, using the sponsored link section of major search engines and trading names that look like those of well known debt charities.
2) Not disclosing the fact that they charge fees We have heard of some debt management companies charging what we would consider to be excessive fees; as much as the first 6 payments into the DMP and sometimes 10% of the entire debt with admin fees of upto 35%. At AMS we charge only the first payment into the debt management plan in full, pay creditors from month 2 and our ongoing administration fee is just 14.99%. (Please click on the word fees to understand our fee structure in exact detail at AMS with examples ).
3) Not offering the full range of debt solutions e.g. in a working week at AMS we will see clients who’s right solution if they have very low levels of debt and very low levels of income is a DRO (debt relief order), these we pass to the Citizens Advice Bureau who can offer expert and free advice. In fact some companies failed to mention or talk about the fee free debt sector at all. We see clients who’s best advice is to look at debt management plans, IVA’s, bankruptcy, whereas others just need some financial coaching or budget planning to look at ways of saving money and maximising income; whilst others are still in the position where they can re-mortgage or get consolidation loans at fairly preferable rates. The fact is you need to make sure the debt solution is fit for purpose and that your client understands all of the pro’s and con’s.
4) Some companies were failing to point or signpost free services such as the Insolvency Services “dealing with debt”, in fact some companies failed to mention or talk about the fee free debt sector at all. Regular listeners will know that we often make mention of our fellow debt advice colleagues at the Citizens Advice Bureau who do a great job.
5) Probably most damning in our view of the lot were some companies that were failing to pay creditors at all – or paying very little over long protracted periods of time thus increasing the anxiety caused to their clients as pressure mounted from creditors, then swapping the client from a DMP to an IVA just to make more money with no thought of their client !!! Actually formally reviewing the DMP sometimes uncovers the fact that an IVA may be appropriate now the client has got used to paying a regular monthly payment but not as a default. Sure we understand that if you can negotiate a favorable final settlement on behalf of your client then you can ultimately get your client out of debt for less, and this is the right approach at times but to counter balance this there are the correct ways and means of doing this, e.g. if your client comes into an amount of money it is only right and proper to clear debt with this money at the most favorable rate to your client, which also ensures the creditors rightfully get their money back quicker to boot.
Having read the report cover to cover and also embarking on a journey to take all of our staff and business partners and associates through the findings of this report the only criticism that we can make is that there does not seem to be enough investigation of the practices of the “fee free sector” which remember are wholly funded by the credit industry, e.g. the banks and the credit card companies fund them, pay their wage bill etc etc. Of the mystery shopping that was done I believe there were 216 mystery shops to 172 debt management service providers but only 4 of these mystery shops were to the “fee free” sector. It’s just our personal opinion but we believe that this sector should be looked at further to ascertain the true base cost of a client if they take this route. e.g. how much of their debt do they end up paying back and how long on average are they in debt for being the key question purely in our view. Apart from this apparent omission we thoroughly applaud this initiative and the depth of this review. Credit where credit is due, great work from the OFT on behalf of those people whom find themselves in debt and as we know only too well at AMS are some of the most vulnerable people. There is nothing better than the feeling of helping a client to turn their financial fortunes and life around.
The Full Report
At AMS we pride ourselves on the depth and quality of advice we give and we are absolutely delighted that the OFT has taken a stance against some of the unfair and mis-leading practices that exist in the market. Please click on the words “the right service” to see the findings of the Office of Fair Trading’s report which will link through to their site. Thanks for listening to the AMS Debt Doctor Team and our 5 years and running debt advice radio show – Help is Just Around The Corner with AMS !
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