DMP Providers - charity or fee-based?

[Andrew Graveson]

There's a common misconception about the charitable status of "fee-free" debt management providers.

I belive that CCCS is:
http://www.charity-commission.gov.uk/re ... no=1016630

I believe that Payplan is a commercial entity with a revenue generating model different to other DMP companies:
http://www.payplan.com/how-are-we-funded.php

My understanding is that "fee free" debt management companies operate under "fair share" arrangements with creditors that are not universal (i.e. there are probably creditors who benefit from the service without contributing).

My understanding is also that under a "fee free" debt management plan 100% of your contribution is credited to your debt. The percentage paid back to the debt management organisation is effectively recognition by the creditor of the work done by the debt management organisation to collect money for them.

This provides an alternative collection model for a creditor:
1 - Absorb the cost of your own recovery department.
2 - Pay a specialist recovery business to do the work.
3 - Pay a "fee-free" debt management company to do the work.

Perhaps this split is essential. Your in-house and outsourced recovery teams can deal with the new cases and the "won't pays". Your debt management partners manage the cases where a debtor is willing to pay but cannot meet their contractual commitments.

I actually think some parts of this debate have become a little unbalanced. Payplan and the CCCS do an excellent job for those who fit the boxes, find their arrangement to be manageable, and receive good prompt service.

Some people report that some of the above factors do not apply for them. There again there are plenty of complaints about poor commercial DMP companies as well.

The expenditure figures used in the "free" sector have been reported elsewhere on the site. Anyone for whom a DMP is the best option can draw their own judgment based on their own perception of affordability, value, service, and (im)partiality as it relates specifically to them.

There are two valid options and people should carefully consider whether the "free" or "commercial" sector will work best.

On a personal note I believe that the above choice for a DMP company should only be undertaken after having taken a wide variety of advice about what solution (IVA, DMP, Bankruptcy etc) would be best in the first place. I do have a concern about the propensity for advice towards DMP's in the "free" sector.

Of course the "fee-free" DMP companies could come on here and post their views on the subject to balance the debate further.

Andrew Graveson
Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

[Andrew Graveson]

Hi Cybus,

Thank you for taking the time to clarify your previous post.

With regard to your questions:

We take instruction on the amount of the current debt from our client. The vast majority send in recent statements to verify this.

In the DMP proposal we provide opportunity for the creditor to correct an incorrect statement of the level of debt.

We ask creditors to freeze interest and charges in return for the debtors best efforts to repay their debts. An impressive number of creditors do so in order to help the individual overcome their debt concerns.

It would not be fair to expect a creditor to freeze interest indefinately. If the debtors financial position improves there is no reason why the previous contractual arrangement could not resume. Different creditors will request a review at different intervals.

I cannot answer your question about whether a higher proportion of creditors agree to freeze interest and charges for the "free" or "commercial" DMP providers as I do not have the information.

I do not believe that a creditor would levy an amount on top of the debt to offset the payment of a fee to a "free free" debt management organisation. The amounts paid are effectively for the work done in collecting the debt.



Andrew Graveson
Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

[catullus]

Andrew

When it comes to these two organisations I don't think that it pays to be even handed and I'll give you a number of reasons why.

1 Whether of charitable status or otherwise, both claim to be independent and yet they are not.

2 CCCS, in particular, has been hostile to IVA's for the last two or three years, claiming that only 2/3% of applicants are appropriate candidates for IVA's, but they have never explained their criteria for that statistic. Nevertheless the statistic has taken root and you hear it being bandied around everywhere, including the big IVA companies. Job done CCCS, I hear the banks saying.

3 CCCS (and PP as far as I'm aware) has never as a charity spoken out against the banks for their lending policies or made comment on the scandals regarding penalty fees or PPI.So much for protecting the poor and defenceless in our society

4 Their benchmark statistics for household expenditure are taking root but they don't update them annually. They can throw resource at expensive glossy brochures every year pointing towards debt trends but they don't update their expenditure statistics annually. Why?

5 Their model, regardless of it's questionable independence, is highly suspect. On a rapidly rising turnover they make very thin profits. The reason? The banks give them only just enough to do the job. The result? Poor quality and badly trained staff.Management who are in the comfort zone, happy to present themselves to the media as occupying the higher ground, whilst casting aspersions at the private sector.

6 My personal experience of CCCS, in particular, is that they are as capable of giving wrong advice as any company in the private sector.

7 I'm not alone in my views. If you're not already bored by this post and want an industry view on CCCS in particular follow the link.

http://myvesta.org.uk/articles/articles ... Page1.html

If you do write your blog, I hope that you'll comment on these issues.

[Andrew Graveson]

Hi Catullus,

Roman poetry is not dead!

My connection with Steve Rhode of Myvesta is that I worked for an organisation based in the USA (for whom I worked both in the UK and USA) for a significant part of my career. The organisation that I worked for had a serious and significant commitment to delivering customer service that I remain to see organisationally matched elsewhere in the UK. The thinking in the USA remains ahead of that in the UK on this subject.

Amongst the lessons I learned during my time in the US were firstly that you're only as good as your next customer, and secondly that when you describe your service you should focus on what you do rather than what you perceive that others do not.

I can therefore only be limited in my blog about how others do operate; just how our company will commit to operating and the standards that we will work to meet.

Actually this all sounds a bit corporate.....we just want to do the best that we can as much as we can.

I find the straightforward opinions that you regularly post on this site (and that Steve does on the Myvesta site) useful and fascinating. It's not for me to comment about others in my industry; they have free access to represent themselves here.

Andrew Graveson
Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

[Sean Tyrer]

Hello everyone,
It is good to read this debate about 'fee versus free' within the context of debt management plans in the UK. A public debate of this nature is long overdue and because the media have been pretty much exposed only to the CCCS and Payplan angle they have not been presented fully with the facts. We are trying to change this at Myvesta as we believe the consumers are being duped to their own detriment.

Add these numbers to the debate by the way...

An average combined bank and credit card penalty charges claim recovers circa £2000. If this returned money is used to reduce a persons indebtedness as a standard component of a DMP with a fee charging debt management organisation then this in real terms would make the DMP cost positive to the consumer in many cases.

In this context, irrespective of the independence and quality of service offered by a fee charging company, the customer is commercially better off by choosing a DMP encompassing this mechanic.

It would be great to see good DMP providers offering this component as standard in debt management plans to indebted individuals. It really would make creditor funded providers squirm as it presents them with a material 'who should I represent' dillemma and exposes their 'fee versus free' argument from a different perspective.

Regards

Sean

Sean Tyrer
Chief Executive Officer
Myvesta UK
http://myvesta.org.uk

[johnz]

One other thing people should be aware of (cos I certainly wasn't[:D]) is that some creditors actually charge the debtor directly for the privelidge of paying by DMP. Admittedly not much though. But one of mine kindly agreed to stop charges and interest, but added £100 to my balance for their admin fees.

Just another morsel to throw into the pot here [:D]

Johnz

[OPTIMIST12]

Well - I am one of the claimed 3% that CCCS deem appropriate for an IVA. When I contacted them early in 2007 they indicated to me that a DMP or IVA was appropriate. Absolutely NO pressure to go down a particular road but they gave me an honest appraisal of what figures - I+E wise - would be acceptable. I told them that I was minded to go down the IVA road and they were kind enough to refer my details to Grant Thornton (who I believe are highly regarded throughout the industry) who subsequently approached me.I declined their polite offer as I had in the meantime approached another company of my choice who subsequently set up and dealt with my (approved) proposal - but I remain very grateful to CCCS and Grant Thornton for their help. I paid nothing for any of this - neither their advice over the phone nor the helpful literature they sent me setting out what DMPs / IVAs / BR are all about.

I dont know the rights and wrongs of "fee versus free" - but I have nothing but praise for CCCS and - from what I have read on the forum - also for Andrew from Bright Oak who appears to me to be a 100% trustworthy guy and someone I would trust 100%. At the end of the day - anyone approaching a DMP / IVA or BR is over 18 and it is up to the individual to take advice and decide the best course for their own case.

[Cybus]

One other thing people should be aware of (cos I certainly wasn't[:D]) is that some creditors actually charge the debtor directly for the privelidge of paying by DMP. Admittedly not much though. But one of mine kindly agreed to stop charges and interest, but added £100 to my balance for their admin fees.

Just another morsel to throw into the pot here [:D]

Johnz

You have partially answered a question I asked earlier in this thread and so it does seem that some creditors increase the level of their debt by way of a levy for allowing the debtor to repay the amount due via Debt Management.

I wonder if you would be prepared to divulge the names of both the Debt Management Company that you are currently using and the creditor who has inflated the amount due to them by way of an 'Administration Fee'?

Tell it like it is.

[johnz]

One other thing people should be aware of (cos I certainly wasn't[:D]) is that some creditors actually charge the debtor directly for the privelidge of paying by DMP. Admittedly not much though. But one of mine kindly agreed to stop charges and interest, but added £100 to my balance for their admin fees.

Just another morsel to throw into the pot here [:D]

Johnz

You have partially answered a question I asked earlier in this thread and so it does seem that some creditors increase the level of their debt by way of a levy for allowing the debtor to repay the amount due via Debt Management.

I wonder if you would be prepared to divulge the names of both the Debt Management Company that you are currently using and the creditor who has inflated the amount due to them by way of an 'Administration Fee'?

Tell it like it is.

I'm with Brightoak who are (trying not to get too fluffy here) my knights in shining armour. They took what I deemed a completely hopeless situation and have shown me that there will be an end to all of this.

The creditor was Simply Be. And to be honest I don't blame them for charging. I'll admit my initial response was oh great. more money. But this isn't their fault. I'm wearing the clothes I bought from them as I speak. So there's no hard feelings there. Just another couple of months payments. And the charge was much less than if they'd carried on charging interest the entire time.

Johnz

[J-DOUBLEYA]

so have bright oak helped you challenge this odious fee ? If there is no contractual provision for this they can not charge it. If there is contractual proviison, is it fair ?
did you sign a conttact ? when ? have you exercised your right under section77/78 CCA ?

When i have challenged simply be or their collection agy reliable coll's they always back down. There is always the dunlop argument if they proceed to CCJ !

I refer mostly to fee free agy's as is my directive however, i have 'routed' a number of clients to this website.

The fee charging industry will always be biased to the fee free side and visa versa. Mel made some very apt comments regarding SIVA's and DRO's when they get implemented as well as the proposed reductions of the limitation period. This whole industry has some major steps to climb.

one thing is clear, fee paid or fee free, one way or another everyone pays !
For me, its the quality of advice , appropriate support, advice and choice.

[OPTIMIST12]

J-DOUBLEYA -
I think some of your first two paragraphs will be way over the heads of many non-expert forum readers like me!!! (Section 77/78 CCA and the "Dunlop Argument" !?!?!?).

[J-DOUBLEYA]

apologies - I am referring to tried and tested case law to challenge unlawful charges and costs. One such case is often referred to as the Dunlop case. You will probably need access to specialist websites on case law such as Bailli to get this.

ss77/78 and for some 79CCA basically gives a debtor the right to obtain information about the account for the princely sume of £1.00. Unless of until this is complied with the debt is unenforceable.

If you ask for a copy of the 'duly executed agreement' and full details of account as well as the terms and conditions of account, and then find there is no provision for such charges, t can be defended. Simple as that.

again, sorry if a bit techy, not intended to show off but simply show that these costs should and could be challenged. This thread earlier asserted that this was only done by fee chargers i take issue with this.

Clients that I help, the full monty, i just wish my superiors would come on sites like this and put the tuppence in officially.

[Adam Davies]

Hi
So do I
This forum is open yo all
Regards

[J-DOUBLEYA]

problem is Andy, some companies take a view that these forums are not impartial just another means of promoting self worth and opportunity to make money etc.

I dont see it like this and if more people contributed the opinions would be more diverse and representative etc. I understand the suspicions held when certain companies wont respond, and to a degree serve em right but dont forget, the management usually make decisons that the soldiers dont have a say in.