Debt management companies: What happens next?
Many of our customers choose to establish repayment plans with us via a debt management company (DMC). Some DMCs are commercial operators who will charge you for their services, while others including StepChange, PayPlan and Christians Against Poverty are funded by contributions from creditors, and are free to the customer.
Following the appointment of the Financial Conduct Authority (FCA) in April 2014, there was an overhaul in the way companies operating within the Consumer Credit sector are regulated. This meant that companies operating within the sector, including DMC’s would have to apply for FCA authorisation, in a bid to improve standards and to ensure customers were being treated fairly.
With the deadline for DMC applications now closed, some of those commercial DMCs have left the market, and others have had their applications for authorisation declined. This means they no longer have permission from the FCA to offer debt advice or debt management plans (DMPs). It is likely that further commercial DMCs will also have to stop offering advice and DMPs over the coming months.
Has my DMP been affected?
If you currently have a DMP in place, it is important that you check to see if the firm is still authorised. If they have had their application declined, you should no longer make any payments to them, as there is a risk that your payments will be delayed or might not be reaching the company you owe money to. To find out if your debt management company is still authorised, you can check on the FCA’s Financial Services Register by visiting www.the-fca.org.uk
If your debt management plan is no longer valid, there are a few things you should do as soon as possible.
1. Contact the company you have an outstanding debt with. Explain the situation and they will often be able to help you right away, or point you in the direction of free and impartial debt advice. Companies should be sympathetic to your situation; however, they won’t be able to help you if you don’t contact them.
2. If you are making repayments by Direct Debit (DD) via a DMC that has failed to achieve FCA authorisation, you should cancel the DD as soon as possible. Your outstanding balance will remain, so to avoid incurring any unnecessary interest or charges, it is important that you set up a new DMP or contact the firm you owe money to.
3. Seek free debt advice. There are a number of readily available sources providing free debt advice, which you can receive over the phone, face-to-face, by email or online. Don’t worry - all conversations are confidential and impartial.
There are a number of charities, who provide free debt advice, such as Money Advice Service, StepChange and Citizens Advice, and can help you set up a new debt management plan for free.