Trust deed agents and upfront trust deed fees

23rd November 2010

Trust deed agents are a topic which regularly appears on the Trust-Deed.co.uk forum. Such agents are intermediaries between a debtor and a trust deed company. They provide assistance with drawing up a statement of affairs, recommending debt solutions including trust deeds, and putting a person in touch with a trust deed company where it is deemed appropriate. Often they operate trust deed websites or cold-call members of the public to find clients.

When such an intermediary (or trust deed introducer) passes a case to a trust deed company, the trust deed company may make a payment for the work the intermediary has already completed on that case. Some agents also charge their client upfront fees for this work, thus receiving payments from two separate parties for their involvement.

Good trust deed intermediaries and trust deed introducers clearly have a role to play; their work is legitimate and lawful providing they hold a consumer credit licence and operate within the rules. After all, trust deed charities and other not-for-profit organisations could be classed as intermediaries.

However, we wanted to know whether our visitors felt trust deed agents should be able to charge a client upfront trust deed fees for this service. We asked:

“Trust deed agents prepare trust deed cases which they then pass on or sell to a trust deed company. Do you think such agents should be able to charge the client an upfront fee for this service?”

The response was as follows:

No: 97%

Yes: 3%

Of all of the 14 questions asked in our trust deed survey, this question produced by far the most emphatic result.

The reason for such an ardent rejection can be summarised thus:

1. It’s a total waste of money . There are many types of debt adviser, commercial and free, who will assess a debtors circumstances and make recommendations without any upfront trust deed charge.
   
2. Evidence of misinformation . The higher the fees being charged, the stronger the incentive to push people into the trust deed option. The Trust-Deed.co.uk forum contains many stories from people who have received misinformation from this type of trust deed agent.
   
3. Confusion . The trust deed agent may make claims about how the trust deed will operate. However, once the individual signs a trust deed their relationship is with the trust deed company. Irrespective of the promises the agent may or may not have made, it is the rules and expectations of the trust deed company which are now in place.
   
4. Delay . While paying the upfront fees a debtor is using money which could have been paid into a trust deed. The end result is clearing the debt later than may have been possible, perhaps by months.
   
5. Legal risks . A protected trust deed means that legal action cannot be taken to recover debts by the creditors. Taking time to pay upfront trust deed fees means it will take longer for the trust deed to be signed and achieve protected status. During such time debt recovery legal action can be initiated by creditors.

The outright rejection of such services by this informed and interested section of the public, along with the indisputable problems (above) which can be caused, leads us to believe that regulators and / or law-makers should take note of these findings.

It might be complicated to change the law to prevent what is in theory a service which consumers can choose to pay for or not. However, the regulators of insolvency practitioners (who handle trust deeds) might be able to require members not to accept referrals from agents who have charged upfront fees. Another option would be for such regulators to require that members do not pay for the ‘work done’ by such agents; after all, they have already charged the client, so why should they be paid twice?

Consumers should also protect themselves from all of the problems associated with these types of services by simply refusing to pay for them. Better advice is available, without charge, direct from trust deed companies, the CAB and Money Advisers among others.

For further information regarding the workings of trust deed agents, please visit our trustworthy forum full of advice from impartial industry experts.

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