Debt Management Companies
Some creditors refuse to deal directly with debt management companies. If a creditor will not deal with a debt management company, you will need to deal separately with that particular creditor.
However this is likely to change from now on until another law change comes in that makes it difficult for Debt Management Companies to operate.
With recent changes to IVA protocol we will see the disappearance of a lot of IVA companies and these services will be replaced with Debt Management Companies that offer an alternative to an IVA.
This means that where IVA companies could take their fees in advance of the creditors, often meaning that people enter into IVA’s not realising that their monthly payments don’t actually reach the creditors until at least 18 months and in many instances creditors don’t receive any money at all until the IVA is complete and the money collected from you just sits there in a client account. This all means that Debt Management Companies will be on the increase.
The Insolvency act 1986 has meant that not all regulations have been updated and from time to time we see cases where clients have been mistreated and the licensing bodies have no power what-so-ever to do anything about it. This leaves clients disenchanted and feeling like they simply cant trusted IVA companies because of the way they make them feel.
The Competition and Markets Authority defines a fee-charging debt management company as one which charges a fee for:
- Providing advice on how to restructure debts, how to alter debt repayments or how to achieve early settlement of debts.
- Providing contacts with creditors in order to make any of the above arrangements (whether this amounts to negotiation or not).
- Providing a facility for a debtor to make one single payment to the agency which it then distributes on her/his behalf to the creditors.
Reviewing the debtor’s financial circumstances and/or payments.