Debt Advice Is An Art Not A Science
3rd September 2013
By Andrew Graveson
I recently sat in a meeting with the boss of a competitor (who I respect) and representatives from a financial regulatory body. We discussed the subject of best advice and in particular the subject of advising people to become bankrupt. It was immediately apparent that our competitor took an entirely different view to mine about in which circumstances advice to become bankrupt would be appropriate. Both of us had sound arguments behind our positions. Neither of us changed our mind.
I was reminded of this meeting yesterday when reading an article in The Scotsman. It was titled “Vultures exploit Scots who are crippled with debt”. You can read it here.
It’s reported in this article that Payplan (a well-known debt solutions company) have provided informal debt management plans to 25% of their Scottish clients. I was amazed by this. An informal debt management plan provides no legal protection from creditors and no guarantee that interest and other charges will be frozen. Trust-Deed.co.uk has long taken the position that residents of Scotland are almost always best-advised to take advantage of the Debt Arrangement Scheme rather than an informal DMP.
The Scotsman article suggests I’m not alone in this view. A Glasgow-based insolvency practitioner is quoted as saying, “There is no advantage of a DMP over that (the Debt Arrangement Scheme) and no guarantee that it will be free of charges or protect the home. But DMPs are heavily promoted and, as we have seen in mis-selling scandals, people tend to be susceptible to that.”
The Scottish Government is currently actively promoting the benefits of DAS to residents of Scotland. You might therefore assume that their viewpoint on this matter is also clear.
So why are Payplan promoting and/or providing so many DMPs in Scotland? It needs to be borne in mind that this company is widely respected and receives referrals from Citizens Advice and trade unions amongst other significant institutions. If they want to respond we’ll happily publish their views here. I simply don’t understand how 25% of clients in Scotland could be best-advised to start a debt management plan, but I don’t doubt that they’d be able to offer a rational justification for this advice model if they chose to.
So what does this mean to you if you’re worried about your debts, looking for a solution, and considering which company or organisation to entrust to provide you with the debt advice that you need?
The simple fact of the matter is that debt advice is an art not a science. Debt advice providers, those with the best reputations along with the utterly scurrilous, will look at identical client circumstances and provide different advice. This may derive from a different personal values held by the decision-makers at various organisations, from the scope of the debt solutions that they actually have at their disposal, or from their narrow commercial self-interests. It doesn’t really matter if you’re the person seeking help with your debts. The fact is that if you ask different organisation for debt advice you’ll get different advice and different recommendations (even between obviously reputable advice sources).
It’s important to remember in such circumstances (no matter how stressed or vulnerable that you may feel about the situation) that you’re also a consumer. There is a wide choice of advice sources and most of them are falling over each other to offer you their assistance. The vast majority offer an advice consultation without cost to you. There is also a choice of different debt solutions. It’s highly likely that several different solutions are available to you, each of which will offer different advantages and drawbacks.
Grasping at the first hand that reaches out to help you is often a mistake. Our forum frequently verifies this observation. Do a little research into which debt advice sources are reputable (and understand why they’re reputable). Speak to two or three of them. Make a list of the debt solutions that each recommends to you. Make a list of the debt solutions that each advises is available to you. Ask lots of questions about these solutions so that you can write down the potential benefits and drawbacks applicable to each.
Following this type of process will provide you with a great chance of selecting an appropriate debt solution provided by a reputable and reliable organisation. Put yourself in an informed position from which you can make a confident decision. There’s a bit of work involved, but the effort made will usually be well-rewarded.
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