ESPECIALLY REAL EXPERIENCES OF THESE COMPANIES
More and more people are failing their Debt Management Plan (DMP) each year, and many of these people have one thing in common, they are with a fee charging Debt Management Companies.
New research carried for the Lloyds Banking Group, and the charity Money Advice Trust by Loughborough University, found that this was mainly due to the poorer methods being used by firms that charge. This is on top of the extra costs associated with the plans, often hidden as administration charges.
The study interviewed 1,003 people including those either in DMPs, (sometimes disguised as other plans; some of which were inferring that the scheme was formal when they were not), or who had been in one in the past five years.
One respondent was paying £400 each month into a debt management plan, of which £300 was being kept as a fee/administration charge by the debt management company; another was charged an astronomical £662 set up fee before even a single penny went to the creditors. Unfortunately these are not uncommon practices.
What was found though was that people who were on a free to client Debt Management Plan, such as those run by Payplan and CCCS, had a much better chance of succeeding with their plans, primarily because they knew all their money was going to the creditor, knew what was happing with their plans, had income and expenses worked out correctly and were able to vary and adjust their plans as circumstances changed.
Joanna Elson, Chief Executive of the Money Advice Trust said:
“People deal with unmanageable debts in a variety of ways, but far too few people take the one step that stands the best chance of making a real difference, that is seeking free, independent advice. When people do take the brave step of confronting their financial difficulties, we owe it to them to ensure they stand the best possible chance of finding a fair and sustainable way back to financial health.”
Some other findings that came to light, included:
- Fee Charging companies adopting a ‘skimmed surface’ approach to budgeting, with little or no discussion about affordability, and in some instances the company had taken the paperwork and then TOLD the client what they wanted each month!
- Fee Charging Companies were deliberately putting people onto plans, when alternatives such as bankruptcy or DROs are more appropriate. Additionally they were not entering into discussions with the client to offer support and help in improving financial situations.
- A number of the fee charging companies organising Debt Management Schemes, failed to make any payment to the creditors, before entering into bankruptcy themselves or disappearing because they are unlicensed and bogus.
It has and always been accepted that people can use either free or fee charging companies, but a couple of thoughts come to mind with this slice of news:
- How will creditors and DCAs look on it, will they hassle and refuse to accept people who are using fee charging companies. Very possible.
- Will the creditors and DCA’s be more accepting and work with the clients of the free to client Debt Management Plans, like those offered by Payplan and CCCS. Very Probably.
If you are with a Fee Charging Debt Management Company now, and would like to look at real alternative options, then we suggest you contact one of the companies below, who will ensure that all your monthly payments reach the creditor.
If you are thinking of looking at entering into a Debt Management Plan, then again please contact one of the organisations below, who will not keep your money.
PayPlan: Is a national organisation with approaching 20 years of experience in dealing with all kinds of financial situations, no matter how bad they are. Their advice and help starts with a simple phone call to 0800 280 2816
CCCS Is an organisation that advises you on available solutions with your financial problems. You can contact them on 0800 138 1111
Money Advice Trust: http://www.moneyadvicetrust.org/content.asp?ssid=175
Credit Today: http://www.credittoday.co.uk/article/14 ... ly-to-fail ]
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