When you are in debt it can be a frightening and worrying time. There is only so long that you can go on burying your head in the sand and hoping that it all just goes away. The reality, of course, being that it obviously does not. On the realisation of this, most debtors at this point then do decide to seek professional help and advice. There are many companies out there that are willing to offer the help that is desperately needed to people in these situations, however in the past that help often come at a hefty price. Also many debtors were often given inaccurate advice.
Debt Management Companies can, and do, negotiate with your creditors on your behalf and they arrange to set up affordable and manageable payment plans for you to repay the debt. However some of these companies in the past were charging extortionate fees for arranging this for clients, and taking their initial fees out of the first few payments that were made by the debtor. This resulted in nothing coming off the debt in the first few months, thereby lowering the credit rating further of the debtor. It also made the payments higher, therefore less manageable. Plans were also set in place for unrealistic lengths of time, and people were spending in excess of 15 years trying to clear their debt. Also some of these companies were avoiding informing consumers of other, more suitable solutions that pertained to their particular situation; for example going bankrupt may have been the best option for some rather than arranging a Debt Management Plan. Of course for these companies bankruptcy or a debt relief order (DRO) would mean they would be unable to charge the client any fees, therefore due to this being of no benefit to them they were neglecting to tell clients about these particular options. This was despite the fact that this would have been the sensible and preferable option in certain cases. The government realised that the industry needed to be regulated, and last year the Debt Management Protocol was introduced.
The government brokered with the industry and the Debt Management Protocol was established. The guidelines are strict and cover every aspect, from the initial telephone call and consultation to insisting on regular reviews once the plan is in place. It has been set in place to protect and help the consumer, to ensure that they are given complete, unbiased and impartial advice by these companies. The strictness of the guidelines and standards that are set for approval was readily shown, when only five of the original twenty five companies that initially applied were actually approved!
You can be assured that those companies that have been approved and who have met the standards, will adhere to the guidelines which include:
- They have to give you complete and impartial advice.
- They have to be transparent about the fees and charges for the Debt Management Plan, and tell you how much they are going to charge you exactly.
- A DMP should only be offered when it is in the best interests of the client.
- A DMP should last no longer than 10 years, if it does the reason why should be readily explained to the client.
- They have to make their clients aware of every option they have, not just those that benefit themselves as a company.
- They should make the client aware of their alternative options for example bankruptcy, a debt relief order (DRO) or an individual voluntary arrangement (IVA).
- They need to inform customers that they are entitled to free debt advice and make them aware of the Money Advice Service website.
- They have to spread their initial fees over six months, as opposed to using the initial payments made.
- They need to have constant reviews with clients and if a client’s particular circumstances change, which make better or alternative options available, then they need to advise of the next best course of action.
Those companies that have shown and proven that they do follow these rigorous guidelines are then, once approved, able to display a badge to make consumers aware of this.
A Debt Management Plan has many advantages and it is an ideal solution for many. In the first place you do not have to deal with your creditors, the company does this for you. This can take away a lot of the stress in itself. A Debt Management Plan will also consolidate all of your debts together, this necessitates you only having to make one easy, manageable and affordable payment to your DMP Company. Sometimes the companies can also arrange to have the interest frozen on certain debts, another distinct added advantage. Once you have a DMP in place the regular payment you make to your Debt Management Company will be split fairly between your creditors to pay off all your debts. Of course there are also disadvantages to a DMP. In the first instance you have to pay the company who are assisting you. Also Debt Management Companies only deal with your non-priority debts; you will still have to deal with the priority debts yourself.
When struggling with debt, debtors can now feel assured and safe in the knowledge that when approaching these compliant companies that they will now be given impartial advice. That if a Debt Management Plan is arranged for them that they will be constantly updated and know exactly where they stand at all times. They can also feel secure in the fact that once the plan is put in place that they will be debt free in a much more appropriate timescale, and that they will not be paying the debt back forever. A debt free future! This is a great comfort to many after spending many months of worrying.
With the Debt Management Protocol you will now receive a much better standard of service from those companies that have been approved, than debtors did receive in the past. Further information on Debt Management Protocol can be found on the DEMSA site.