Are you considering signing up for debt help? It is important to know the debt management protocol that debt management companies must keep. In this article, Cashfloat explains the rules that debt help companies must follow. Although we are a short term loan lender, and a provider of credit, we understand that it does not take a lot to need debt help. We would like to make the experience as stress-free as possible.
What Is The Debt Management Protocol?
The rush of companies which entered into the debt management industry were failing to provide an open and transparent service to their customers. Therefore, the government, through the department of consumer affairs decided to launch a debt management protocol.
The government introduced a debt management protocol to protect those people who were paying a fee to sort out their financial problems. Launched in 2014, the Debt Management Protocol came into being after a number of companies had their credit licences suspended by the Office of Fair Trading. It begun in an effort to drive up standards and reduce the number of disadvantaged people who were not getting the best advice and help with their debt problems.
Debt management companies which signed up for the Debt Management Protocol had to pass an audit before they could advertise the company as being ‘debt protocol compliant’.
How Does The Debt Management Protocol Protect Customers?
The Debt Management Protocol is designed to ensure that customers get a high standard of service. It also provides assurance that any debt management plan will be in the best interests of the customer and that the company concerned will operate best practices.
A debt management company that signs up to the protocol must follow the Office of Fair Trading credit guidance regulations. They also must proceed through the monitoring process by the relevant standing committee.
The Procedures Of The Debt Management Protocol
A company that is offering debt management services must operate with truthfulness, honesty, decency and must be legally accountable. There should be no cold calling or obvious harassment that could cause stress and the company must be totally up front about any fees or charges.
If a company follows these standards then the company can advertise itself with a protocol badge but customers should also be made aware that this is a self regulatory protocol. Any business offering this protocol badged service must not offer another non protocol service.
Finally, the business must always make customers aware that there are other debt management companies that offer the same services for free. There must be a link on the company website to a free money advice service.
There are strict criteria for companies that deliver services through the protocol. After a thorough assessment of the customers circumstances, the company must only undertake the work if a debt management plan is the best course of action to resolve the debt situation.
This means that a debt management company can only offer a debt management plan if certain criteria are met. These include the following. There should be two or more debts owing, there should be a budget surplus after they take all essential bills and fees into account. The debt management plan should not run for more than ten years.
Also required is a common financial statement that is thoroughly explained to the client. Finally, the company must take all steps to ensure that the client discloses all debts and assets before signing a contract.
The debt management protocol has a set of rules about administration of a contract. The rules state that within a period of ten days the company must notify all creditors of the client’s decision to enter into a debt management plan. It should also make the creditors aware if the customer breaks the contract, within 30 days. As well as making sure that they act only for the client the company must provide information to creditors that is accurate, complete and objective.
A cooling off period of 14 days is mandatory. They must deposit funds received from the client into a separate account and paid out to creditors as soon as possible. There must be no holding onto customers money and delaying the start of the monthly payments. A review should always take place after the first year of the agreement and thence annually.
Included in the protocol are other factors such as a statement of account every six months and pro rata payments plus a response to questions within ten working days.
All companies signed up for the protocol must ensure that staff are fully trained in the policies and practices. Training must be regularly monitored and best practice in debt advice must be followed.
The most important fact about fees for debt management services is that they should be complete, clear, transparent. They should also be put in writing before the customer agrees to the contract. The charges should be set out in such a way that the client is fully aware of the total cost of the service. The service must also advise creditors of the fees.
The charges for debt management plans should be reasonable. Until both parties agree and sign the contract, there can be no fees charged. If there is an a initial fee to set up the contract then this should be spread over the first six months of the agreement. In addition, disbursements of funds must start at month one unless the creditors have not provided enough information for the payments to start.
Any client who moves to another debt management plan provider should only pay for the administration that has already taken place on the contract.
Other Information About The Protocol
This has been a brief look at how the debt management protocol was set up and how it works. Customers who are in debt from taking out too many instant payday loans can see that this protocol was set up for their benefit. They may now have a clearer understanding of what to expect from a debt management company that displays the protocol badge.
There are several other sections regarding the debt management protocol agreement. These are concerned with data protection, monitoring, complaints and creditor standards. The full protocol is available to see online. In addition, the standing committee that helped to set up the agreement with debt management services is tasked with reviewing the effectiveness of the protocol.
A Final Look At Debt Management Protocol
Setting up the debt management protocol was to ensure that the fee charging debt management services treat customers fairly. Part of the protocol insists that customers should be made aware of services that operate for free. However, it seems that another big shake could help.
The government should place more emphasis on the charities and organisations which provide this service for free. In this way people who are already experiencing financial difficulties should not have to pay extra to free themselves from financial problems.