More than half of those turning to commercial debt management companies will now be protected from upfront fees, Consumer Minister Jo Swinson announced today.
This is a result of 22 companies, who control more than half of the commercial market, signing up to the voluntary Debt Management Plan Protocol which went live on 1 October 2013.
The firms have also agreed to spread the recovery of their set up fees evenly over at least the first six months, ensuring that plans are affordable and sustainable for the consumer.
They will also have to tell consumers about other debt relief options available, including free debt advice and management services. Creditors will further benefit from the protocol as they will have more reassurance over repayment of their debts.
The protocol commits companies to:
* No upfront fees for consumers
* Spread the cost of setting up a debt management plan over six months.
* Make consumers aware that free debt advice is available to them – and point to the Money Advice Service website.
* Payments to creditors from the first month to address concerns of creditor representatives that they didnt always know when a customer was in a plan.
* An assurance for creditors that only sustainable plans would be put forward for them to consider i.e. where there was a realistic commitment to repayment.
* Pro-rata payments to ensure that creditors do not receive less than they should as the pot of money will be fairly divided among all creditors.
Access for creditors to full financial information about customers (subject to compliance with Data Protection Act principles).
Consumer Minister Jo Swinson said:
This is a major step forward for people using commercial companies to manage their debt problems. They will now have the reassurance of added protections when using firms signed up to the debt management plan protocol.
It is important that they should also know that free advice is available to consumers with debt worries. They can contact the National Debtline on 0808 808 4000 for free and confidential advice. The Money Advice Service also signposts people to appropriate and free debt advice services and can be contacted via: https://www.moneyadviceservice.org.uk/en
The Government is committed to leading the debt management industry towards improved standards including transparency for creditors and a better deal for consumers.
Caroline Siarkiewicz, Head of the UK Debt Advice Programme, at the Money Advice Service, said
We welcome the launch of the Debt Management Protocol and are delighted to have been able to work together with creditors, consumer groups and debt advice providers to develop it. The Protocol is a significant step in raising the quality of advice provided by debt management companies, and we are also pleased that the FCA have incorporated elements of the protocol into their proposals for tougher regulation of consumer credit. Our vision is to make debt advice easier and quicker for people to access, and also to continually improve the already high – standard and quality of advice delivered in the UK. The Protocol, together with our own work around standards in the industry, is part of helping to achieve that ambition.
David Mond, chair of the Debt Resolution Forum (DRF), said:
Debt Resolution Forum welcomes the new Debt Management Plan Protocol and believes it has a long term future in promoting standards in debt management, not least because organisations with the protocol badge will be independently monitored and assessed. We hope it will build trust between debt resolution companies, creditors and consumer representatives.
Melanie Taylor, Director of External Relations at the Debt Managers Standards Association (DEMSA) said:
We are very pleased with all the hard work member firms have put in to meeting the higher standards required to be Protocol compliant. This marks a big change for the sector and a significant step forward in improving the quality of service consumers can confidently expect to receive; when dealing with an accredited provider.