Further OFT Action Against DMP Providers

25th October 2011

Since 2010 the OFT (Office of Fair Trading) has been trying to drive improvement in the commercial DMP (debt management plan) and debt advice industry. During the period 61 businesses, not including any who may have offered the debt arrangement scheme as far as we are aware, have had their consumer credit licences revoked, refused, or have chosen to surrender it. A consumer credit licence is required to provide any kind of advice about debt solutions including trust deeds, the debt arrangement scheme, or a DMP, irrespective of whether a fee is being charged.

The Office of Fair Trading has now taken action against three more debt management businesses. Two are London-based. The third, an individual named Deric Hamilton Oliver of Balerno, Midlothian, had his application for a licence refused because he provided false information to the OFT, disregarded the regulatory requirements, demonstrated a serious lack of integrity, and provided debt management services, potentially including advice on subjects including the debt management plans or the debt arrangement scheme, even though he was not a licenced debt advice operator.

Trust-Deed.co.uk advisers take many enquiries from visitors to the site from people who are worried about this type of announcement and the negative media attention that debt advice industry can attract. It is important however to distinguish between the different types of debt solution that exist (i.e. a trust deed, debt arrangement scheme etc.) and the protections offered by each, for example, a debt arrangement scheme is, in many ways, far safer than a DMP.

Debt management plan providers seem to be the main area of risk. They are not formally regulated, there are no formal requirements for staff qualifications, and the way that some DMP companies handle client cash is much less rigorous than would be the case for a trust deed or the debt arrangement scheme. A DMP itself is also not backed by legislation in the same way as the debt arrangement scheme is. It’s “informal” in nature, comprising of a series of agreements between a debtor and their creditors negotiated by an intermediary. Other debt solutions like the debt arrangement scheme are more formal.

Anyone who is worried about debt but has significant assets, or a job that might be affected by insolvency, or the ability to repay their debts in a reasonable timeframe with a bit of help, may wish to steer clear of trust deeds. Rescheduling the debt repayments in an affordable way may be the answer for many such situations, and the debt arrangement scheme might be the best option.

Debt arrangement scheme usage has been on the increase recently, but why are so many residents of Scotland continuing to select a debt management plan (DMP) in preference to a debt arrangement scheme (DAS)?

The debt arrangement scheme is backed by legislation that protects debtors from legal action from their unsecured creditors and prevents interest from being added to debts. A DMP does not guarantee this. The debt arrangement scheme utilises a small number of supervised payment distributors operating to defined frameworks. DMP companies are not overseen in the same way. The debt arrangement scheme is set-up by specially trained persons who are experts in their field. DMP advisers in weaker firms may be little more than uneducated salespeople.

Debt management plans might be just as suitable as a debt arrangement scheme in some circumstances, but most residents of Scotland would be better protected, more certain, and more reassured by looking at the debt arrangement scheme as a better way to reschedule the repayment of debt affordably.

To learn more about the different types of debt solutions available to you, and to find out whether you could be better off with a debt arrangement scheme, visit our helpful website and forum. Trust-Deed.co.uk is full of helpful information about all the different forms of debt solution, including the debt arrangement scheme. You can use the site to find all the facts you need, talk to people in similar positions in our forum or speak one-to-one with our professionally qualified debt advisers either online or over the phone. Call the team now on 0800 043 7201 to learn more about the debt arrangement scheme.

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