Complaining about debt management plans

Are the charges being debited by your debt management plan providers too high?

Most debt management plan suppliers charge a fee for their services which include helping you devise your budget, facilitating your DMP’s implementation and undertaking contact with your creditors on your behalf. You should make sure that you are given a clear indication of all the fees that come along with utilising a DMP suppliers services, otherwise you could end up having your problems escalate and your total debt levels getting higher, rather than being gradually reduced.

The following guide should outline to you which steps you can take if you believe you are being charged unfair fees or are being exploited by your DMP provider.

How much can a DMP supplier charge you for?

There aren’t any regulations or caps on the total amount a DMP supplier can charge in fees to their clients. However, suppliers are bound to a series of Financial Conduct Authority rules and guidance which necessitate that they must clearly identify the costs of their services and be transparent about all fees being charged throughout the procedure. This is a key aspect of the FCA authorisation they have, and they’re legally obligated to have this.

Furthermore, no more than half of the cash you pay to a debt management plan supplier should actually go toward their pockets- it is imperative you ensure over 50% of the total monthly sum you pay to your DMP company is redistributed to your creditors and this figure rises after the initial 6 months of your service. You should also make sure that the total costs of managing and regulating your debt management plan are divided evenly over the time you are on it, and not simply charged in one, unaffordable lump sum.

What information were you given about the charges?

It is important to remember that not all cases of customer discontent towards a debt management company necessarily constitute that they have acted unfairly. The decision about whether your debt management plan provider has acted unfairly and charged you excessively is dependent on the terms and conditions you were told about their services when you first signed up for your debt management plan.

It can be reasonably construed that your provider is charging you unfair fees if the following are applicable to your situation:

The fees may be unfair if any of the following apply to you:

  • The debt management plan supplier neglected to make you aware that it could result in your paying a larger amount than your outstanding debt balance for an extended period of time, instead only to highlight to you the short term savings you would make from the solution each month.
  • The supplier failed to make you aware that you would be charged with fees.
  • The supplier failed to make clear the types of fees you would be charged for, like a fixed fee, deposit or periodic management charge.
  • The supplier neglected to alert you of the total amount of money you would end up paying by the end of your debt management plan
  • The provider is currently using more money from your monthly contributions as payments to their company than to your creditors.
  • The supplier failed to make it clear how much of your monthly payments would go to them, and how much would go to your creditors.

Under current regulations, debt management plan suppliers are obligated to provide you will all the above information prior to coming to an arrangement with you. If you believe that your supplier did not do this, then they might be breaching FCA regulations and you will be fully entitled to launch a complaint and seek compensation.

Which measure can you take to address unwarranted charges?

If you believe that the fees you have been charged by your debt management plan provider are larger than they should be, then there are a multitude of options you can explore in order to remedy this problem:

  • Make a formal complaint to the debt management plan supplier directly- they’re legally obligated to respond and address the issue in a fair and balanced manner.
  • Lodge a complaint to the Financial Services Ombudsman- Undertake this course of action only after you have failed from your formal complaint.
  • Consider terminating your debt management plan arrangement- If you cannot find an amicable resolution to your problems, then consider leaving the plan and either managing it yourself or using another company.

If you are contemplating terminating your debt management plan arrangement, then ensure that you analyse your contract meticulously in order to ascertain if there are any clauses specifying your entitlement to a rebate for some of the fees you have already paid.

What to do if your DMP charges are raising the overall value of your debt

If you believe that the fees your provider is charging you are fair on reflection, this does not mean that they still can’t be problematic. If your supplier is taking a cut from your monthly contributions, this will always mean there is a smaller sum of money to redistribute amongst your creditors, meaning you will take a longer period of time to repay your outstanding balance.

If you are apprehensive that the fees your provider is charging you is raising your arrears, or making it more difficult for you to clear your debt, then you might have to contemplate your debt management plan altogether. As your plan is not a legally binding debt solution, you can cancel at any point irrespective of whether the fees are fair.

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