Media spotlight on debt management plans & trust deeds

18th October 2011

Debt management plans and trust deeds often get a hard time in the media. A recent article in The Guardian demonstrated very well why this can be the case. A reader had written in to the paper with concerns about a debt management plan where she had not received sufficient information, the debts took longer than expected to be cleared, her payments weren’t made quickly enough and her credit rating had not improved despite a good repayment record. Complaints about trust deeds have also featured in the media periodically.

The concerns certainly appeared to be very genuine and an initial reading made the debt management provider appear to have provided a very poor service. Once the issues were investigated the situation looked very different. A single creditor had continued to levy high interest and charges (the rest did not), some creditors took an age to receipt the payments, and debt management plans in themselves were never intended to be a tool to immediately improve a credit rating (the same is true of trust deeds).

Was there anything wrong with the debt management plan and how it was handled? Not really. Are debt management plans inherently limited in terms of how they can help a client? They certainly are. Scottish residents have other options, including trust deeds or the Debt Arrangement Scheme, which provide a much greater degree of certainty for the individual using them.

Trust deeds do not attract as much negative media attention that debt management plans frequently do, but trust deeds aren’t perfect either. However, trust deeds are backed by legislation which determines rules that govern how every person involved with trust deeds must act. Debt management plans are informal; they rely on the goodwill of creditors, the skills of the debt management company and the determination of the client to work. Unlike with trust deeds, if one part of that breaks down the whole arrangement can be rendered ineffective quickly.

Protected trust deeds will result in interest being frozen. The Debt Arrangement Scheme is no different; provided the DAS payments are made the client is protected from interest and charges.

Protected trust deeds and the Debt Arrangement Scheme also put barriers between the client and their creditors. The first barrier in trust deeds or DAS is that of the intermediary (the trust deeds provider or DAS Approved Money Adviser) each of which has statutory responsibilities and some power. The second barrier with trust deeds is one of legal protection; protected trust deeds or the Debt Arrangement Scheme prevent included unsecured creditors from taking legal action against the client if they do what they said that they would within their trust deeds or DAS.

The problems for debt management plans, and the reason that they will remain negatively portrayed in the media, is that they lack much of the strength, power and backing that is afforded by protected trust deeds and the Debt Arrangement Scheme. It doesn’t mean that debt management plans are bad or that trust deeds are wholly great; for some residents of Scotland that require flexibility or a short-term measure they may be very good. Debt management plans are however a little uncertain by comparison to trust deeds or DAS.

If you live in Scotland and you’re in a debt management plan don’t fret too much about negative media reports about DMPs. Consider the alternatives, like trust deeds, though. Trust deeds or the Debt Arrangement Scheme may leave you much more protected, certain, and facing up to a potentially shorter repayment term.

To find out all the information about the debt management solutions open to you, including trust deeds, visit the rest of our website. Here at Trust-Deed.co.uk we provide accurate information about trust deeds, debt management plans and debt arrangement schemes so that you can make your mind up independently of media shock stories. Learn more about trust deeds and get trust deeds advice from our fully-qualified trust deeds advisers on 0800 043 7201.

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