IVA and Debt management providers around the UK are welcoming the introduction of a new Debt Protocol aimed at increasing standards and driving out the cowboy firms, says IVA broker IVAOnline.co.uk
The new Protocol was introduced to the industry by Business Minister Jo Swinson and is part of a joint initiative between the Insolvency Service, IVA providers, debt management trade associations and groups of creditors. As well as raising industry standards, the Protocol will make Debt Management Plans more sustainable and ensure creditors will get back more of the money they are owed sooner.
The current system allows the set-up fees for debt management plans to be paid to the administering debt management company before the creditors, however the new Protocol will see the set up fees spread over at least the first six months of each plan so creditors will start to be paid back sooner.
Consumer Affairs Minister Jo Swinson said: “This is good news for consumers faced with debt problems. I am pleased to see commercial providers making these changes, which will see them help consumers by spreading the costs of the plan.”
A spokesperson for debt management trade association Debt Resolution Forum (DRF), said: “The new protocol will have a huge impact on the many thousands of plans put in place by debt management providers, making them more sustainable and achievable, and giving consumers confidence in their providers.
The protocol’s development will be overseen by a standing committee and is considered to be an important step forward in creating a trustworthy industry that operates to high standards. The Office of Fair Trading has already begun to take steps to remove companies that operate below minimum standards of service, as well as prevent those who could not achieve a high standard from entering the sector in the first place. Some 100 consumer credit licenses have been revoked or refused since 2010 by the OFT, and there are more investigations currently underway.
A spokesperson for Individual Voluntary Arrangement Company, IVAOnline.co.uk said: “The Protocol is part of a government plan to raise standards in the consumer credit and personal insolvency sector and puts into place minimum standards of best practice for debt management companies to adhere to. Many professional debt management firms already operate to these standards, as they understand the need to have a solid reputation for good service and value for money.
“While mandatory, the hope is the Protocol will become a standard to which IVA, Trust Deed and debt management companies will want to uphold, not to mention a mark of quality that immediately tells consumers that business can be trusted to operate professionally and treat them fairly.”
However, the DRF believes that a significant proportion of consumers that are happy to pay a fee won’t be those in the most desperate situations. “Currently, around three quarters of debt management plans are provided by fee-charging companies and 40% of clients have shopped around, with 20% either having considered free advice or having moved from a free to client advisor. Fee charging debt solutions providers’ clients are far less likely to be the very vulnerable individuals advised by creditor funded organisations and debt charities.”