Every debt management plan firm is bound to a clear and specific set of regulations which have been outlined by the Financial Conduct Authority (FCA). These rules are applicable to all companies providing debt solutions, irrespective of whether their service is free or comes with a charge.
The following page will identify the regulations that debt management plan providers are required to abide by, so you can ascertain whether your presiding firm is compliant and isn’t misleading you.
How DMP providers are regulated
In order for any company to enter into the finance industry and offer debt management services, they must first acquire official authorisation from the Financial Conduct Authority. This authorisation is given on a conditional basis, and there are a number of regulations and a clear code of conduct that they must adhere to whilst providing debt assistance services in order to retain their approval.
These rules include:
Clear and truthful advertising
Debt management firms must provide clear, accurate and truthful information within all of their advertisements and marketing itinerary, and cannot omit details of any service or debt solution they are providing in order to increase their chances of acquiring a customer. The key rules surrounding the advertising that providers must abide by are:
- Guaranteeing that all content and information that they market is truthful, clear and easily understood
- Ensuring that all their marketing claims are clear and truthful; deceptive claims such as telling you that they will guarantee that late and interest charges are frozen on your debt or that using their service will make you debt-free are prohibited.
- Making sure that their service isn’t erroneously advertised as being government-backed, or posing as a charity.
If your debt management plan provider has failed to adhere to one of the above rules, then they are guilty of being incompliant with official Financial Conduct Authority regulations and you are entitled to make a compliant.
Clear and honest about service fees
All debt management plan firms which ask for a fee for their service are expected to clearly outline the costs of their service and elaborate on how they will charge you for this right from the outset of your relationship. This is a condition of their Financial Conduct Authority authorisation, and a failure to do this will put them at risk of losing their license to provide debt management services. They are also required under the regulations to identify how the fees will impact the duration of your debt management plan and the amount given to your creditors each month. Remember, a failure to do this will constitute a breakage of the rules by your provider, so you can launch a complaint and seek a refund if you believe that they have failed to clearly explain their fees when you first set up your debt management plan.
Debt management firm representatives are prohibited from visiting your home without receiving prior permission to do so from you. They are also barred from contacting you via text, telephone or email without obtaining your consent. If you are currently being contacted by a provider who hasn’t received your approval to do so, then you can launch a complaint against them citing that they have broken official regulations by cold calling you.
Financial advice regulations
As well as providing debt management services, certain companies also offer financial advice to their customers. The Financial Conduct Authority (FCA) has also set out a clear set of regulations surrounding the protocol that providers must abide by when providing financial advice. A failure to do this will put a debt management company’s status at risk and you should check that your presiding provider has done the following for you in order to ascertain whether to launch a complaint against them or not:
- An accurate evaluation of your circumstances.
- A thorough analysis of your income, including a request to see supporting financial documents to the information you provide.
- Given you a clear indication of the potential repercussions if you fail to make your payments to your creditors.
- Explain the reasons why the total value of your debt might rise whilst you are using a debt management plan if your monthly contributions are lower the rate in which interest and late fees are being applied to your outstanding balances.
- Emphasise the imperativeness of paying your priority debts each month, such as your housing, utility and food expenses.
- The advice they provide you with is in your best interests and they do not sign you up to a debt solution which is beneficial for them and detrimental to your situation.
- Provided you with a copy of the financial statement they have passed on to your lenders
- Give you a comprehensive account of all the options available to you and suggested more relevant solutions if your existing one isn’t improving your situation.
- Conducted a thorough assessment of your monthly expenditure, including the amount you spend on all your living essentials
There are a number of key service regulations that your provider must abide by. These include:
- Supplying you with a statement of account if you request one
- Replying to any complaints you launch against them in a quick and fair manner
- Updating you regularly about any developments with your debt management plan or any recent creditor disclosures they have been given that impacts your financial situation.
- Possessing pre-emptive, contingency plans that all representatives are familiar with in order to assist those who suffer from mental illnesses or are suffering from severe financial difficulties.
- Telling you to contact a free financial advice firm for further assistance if this would be beneficial to your situation.
- Making sure you are provided with regular updates about all creditor interaction they have undertaken and any arrangement they have managed to secure with them surrounding the repayment of your debt.
Pre-contractual information requirements
Under official regulations, debt management firms must also provide you with clear and written information about the following before asking you to sign a contract with them:
- The term of your contract with them.
- The fees they will charge you and the overall costs of using them to manage your debt.
- The type of service that they will provide for you including a breakdown of each aspects costs.
- The impact that using one of their debt solutions will have on your personal credit rating.
- A clear indication of whether you will have to pay a cancellation fee for terminating your arrangement with them prematurely or whether you will receive a refund for any fees paid to them up until the point of cancellation.
- The manner in which your monthly contributions to them will be redistributed to your creditors and the amount that they will take from these in order to cover their fees.
- The timeframe in which you will have to make payments to them and a clear indication of your initial payment date.
Other informational requirements
It is imperative that you also obtain the below information in writing at some point whilst being serviced by a debt management company:
- Which of your personal liabilities are part of your debt management plan and which ones have not been included
- A clear indication of what will happen to you if you fail to make your payments for your priority debts each month, such as your housing and utility bills.
- An official disclosure that your creditors are able to continue pursuing you with court action against you for the repayment of their debt.
- Information about the potential repercussions if you fail to reply to contact from your lenders.
I wasn’t given some of the information above; what should I do?
If you are someone who has signed up with a debt management plan firm already, and you believe that you have not received clear information about any of the above requirements, then you should consider launching a complaint against them either directly or to the Financial Ombudsman Service.
You should also contemplate terminating your existing arrangement with a provider if you find that they have intentionally withheld some of the above information from you because you are essentially putting control over your financial situation into the hands of an institution which has proven to be untrustworthy. If you do decide to do this, you should evaluate your contract with to see if they charge any cancellation fees or to ascertain whether you are entitled to receive a refund for any of the fees you have paid them up until the point of cancellation.
If you are in the process of reaching an agreement with a debt management plan firm but have not signed any contract yet, then it is recommended that you use the services of a different provider in the event that you find that they are withholding information from you.