Debt Management in Scotland – FCA Warnings

Debt Management in Scotland – Is It A Suitable Debt Solution?

debt management Scotland


Scotland has a range of debt solutions which simply aren’t available elsewhere in the UK. When it comes to debt management options in Scotland, your choices are different.

All around the UK many people have come to rely upon a debt management plan. This type of debt plan aims to negotiate reduced payments with your creditors. It also involves a request for interest and charges to be suspended on the debts.

Many people find that a DMP improves their financial position. However, it comes with few guarantees. Debt management in Scotland simply cannot be sure to stop debt recovery legal action being started against you, or to stop interest being charged on debts.  

What Are the FCA’s Concerns about Debt Management Plans?

The Financial Conduct Authority has completed an in-depth study of the UK’s debt management sector. Their findings have raised some serious concerns:

  • Customers aren’t always told that free help is available.

  • Advice may be provided that isn’t in the customer’s best interests.

  • Customers may be sold poor-value add-on products that result in longer repayment plans.

  • Client money may be inadequately protected.

The sharpest FCA criticisms were reserved for fee-charging debt management plan providers. However, even free-to-client DMP providers were found to have provided advice on a high-risk or medium-risk basis around 70% of the time.

It’s well-known that certain debt management firms, including free-to-client providers, have been advising Scottish residents to enter debt management plans on an almost industrial scale. Many such clients haven’t been properly advised about an important alternative.   

What Is The Alternative?

If you live in Scotland you have access to the debt arrangement scheme (DAS). This plan isn’t available anywhere else in the UK.

In many ways such debt arrangement schemes work just like debt management plans. You pay what you can afford each month towards the debts, until they’re eventually cleared.

However, once a DAS plan has been set-up you’re guaranteed (so long as you stick to the plan) that:

  • No interest will be charged on included debts.

  • No legal debt recovery action will be taken in connection to included debts.  

A debt management plan simply cannot (and does not) offer you certainty on these matters.

With all of the serious concerns raised about debt management plans by the FCA regulator, and the major benefits associated with the debt arrangement scheme, can it be sensible to carry on using debt management in Scotland?

For the vast majority of people, we don’t think that it is.

What Should You Do?

If you live in Scotland and you’re using debt management we suggest that you quickly take advice on your options. This advice applies no matter whether you’re paying a firm for your DMP or if it’s being provided by one of the free-to-client providers (like StepChange or Payplan for example).

Who can help you with this? Many organisations provide debt advice but, as demonstrated by the FCA study, standards can vary considerably (and be very poor in certain instances). Make a careful choice.

We’d suggest approaching the Money Advisers that work at your local Citizens Advice or Local Authority for example. Our in-house professionally qualified debt advisers are also available to help you – please get in touch today if you’d like to review your existing debt plan.

You’ll quickly be able to find out whether you qualify for the debt arrangement scheme. You’ll also find out whether other options (such as protected trust deeds or sequestration) might be considered with a view to more quickly putting your debt troubles behind you.   

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