If you decide to use a debt management plan, then you can either set it up personally or use the services of a debt management plan firm to formulate and set it up on your behalf. If you use an external provider, then you will usually have to pay them a monthly fee, which should be clearly defined from the outset of your arrangement. However, if you believe that you were given false information about the size of the fees when you initially signed up to the services of a debt management provider, or believe that their inclusion within your monthly loan repayments is worsening your situation then you may believe you are paying your provider too much.
The following page will outline the typical amount you should expect to be charged in fees by a debt management plan provider, and the protocol you should take if you believe you have been overcharged excessively.
How much is a debt management plan firm allowed to charge?
There are no guidelines or regulations which correspond with the maximum amount a debt management plan provider can charge in fees, though they are legally required to make it clear how much you will have to pay. Ensuring that you are fully aware of how much you will have to pay them in fees is part of a provider’s financial conduct authority authorisation and they are expected by law to uphold this code of conduct.
Furthermore, at least 50% of the monthly contributions you pay to a debt management plan firm should be redistributed to your creditors – the most a provider should take to cover their fees each month should be 50% and this should decrease after the initial 6 months of your debt management plan. Furthermore, your provider should divide the overall costs of managing your debt management plan across its duration, and you should cover their fees in even, monthly instalments.
How can I tell if I am being charged unfair fees?
The reality of whether the fees your debt management plan provider is taking from you each month are unfair is entirely dependent on the terms and conditions of their service that they outlined when you set it up initially.
You fees might constitute as being unfair or excessive if the below are relevant to your situation:
- Your debt management plan provider is using over 50% of your monthly contributions to your creditors to cover their fees.
- Your provider did not clearly explain or make you fully aware of how much you would be paying them each month from your debt management plan contributions and how much would go to your creditors.
- Your provider failed to make you aware that you would be charged a fee each month to cover their fees.
- Your provider did not clearly specify the overall amount of money you would pay them over the course of your debt management plan and how long this timeframe would be.
- Your provider failed to fully explain which fees you would be paying for each month.
Under official Financial Conduct Authority regulations, all debt management plan providers must make all of this information clear to you before they can begin servicing you. If you believe that any of the above was withheld from you, then you can lodge a formal complaint against your presiding provider.
I believe I’ve been charged unfair fees; what can I do?
If you believe your debt management plan provider is taking too much from your contributions to them each month to cover their fees, then there is a number of measures you can use to address this issue:
- Make an internal complaint to your debt management plan provider. This is the first step you should take if you are unhappy with the amount you are being charged on fees by your provider, and they are legally required to reply in a quick and fair manner.
- Make an external complaint to the Financial Services Ombudsman. You should only do this after you have launched a complaint to your provider directly and have failed to come to an amicable resolution over their fees. The Ombudsman will evaluate your complaint and will take action against your provider if they believe you have a legitimate case.
- Switch supplier altogether. If you fail to receive any form of compensation or change in your payment arrangement to your provider after launching an internal and external complaint against them, then it would probably be best that you cancel your current debt management plan and move to a new supplier who charges more competitive fees.
Remember, if you decide to end your existing debt management plan arrangement early, evaluate your contract with your provider to see whether they will charge you any cancellation fees or ascertain whether you are eligible to receive any refunds for the fees you have paid up until the point of termination.
My fees aren’t unfair but they are too high, what should I do?
If you believe that your provider is charging you fairly, but still believe the amount they are taking on fees is counterproductively high to your situation, then you might want to consider cancelling your debt management plan and using another measure to tackle your financial problems.
Remember, as a debt management plan is a legally constricting debt solution, you can cancel at any point as long as you make your creditors and providers aware of your desire to do so.