Debt Management Plan and fee-charging companies
Summary: Debt Management Plan and fee-charging companies - This paper looks at the different types of DMP Company and the whole issues of fees that may be payable.
There is no point paying a fee when there is no need to. There are several companies that will set up and manage DMP's and will pass on the whole of your monthly payment to the creditors. National Debtline or Citizen's Advice Bureau may guide people to companies such as Payplan or Stepchange to set up a DMP. It may well be sensible to talk to one of these companies to see how they can help. However many people to pay someone to act on their behalf.
Why pay a fee?
- Being accessible - sometimes the "free DMP providers" can be very busy and hard to get hold of. A good fee-charging DMP company should be easily accessible and preferably providing a regular person who understands your case and to whom you can relate in an ongoing way.
- Being proactive - the free providers simply pass on the monthly payment to the creditors. A good fee charging company will actively negotiate with creditors to get interest stopped on the debts - essential for a DMP to work effectively.
- Being flexible - a more personal service may create greater flexibility in changing payment levels, adding creditors or changing solutions.
How do I know if a fee-charging company is a good one?
- Speak to more than one to gauge level of expertise, and openness about all options
- Feel confident that the person you are dealing with is not pressurising you into a quick decision - or worse still, is just after your bank details
- Explore consumer forums or comparative websites
- Investigate a company's own website and feedback
- Make sure the plan you are being presented with is understandable and clear. Make sure fees are explained so you know exactly what part of the monthly payment is being kept by the DMP company.
- A number of companies are linked to an organisation called Demsa (Debt Managers Standards Association) - see demsa.co.uk. These operate under a strict code of conduct that has been approved by the Office of Fair Trading.
- Give yourself time to understand what the company is offering and call them back with a question or 2 to see how easy it is to speak with the same person and how your questions are handled.