MOJ review Debt Management regulation

[Amethyst]

http://www.justice.gov.uk/consultati...nt-schemes.pdf
impact assemement (a bit easier to read actually) http://www.justice.gov.uk/consultati...ct-annexes.pdf

An excellent consultation paper from the Ministry of Justice giving basically three options for sorting out future regulation of fee paying, and free debt management companies.

There are 3 main options that have been analysed:

Option 1: Do nothing more than continue with measures underway to raise awareness about current schemes and enforce existing rules with operators (the base case);

Option 2: Improve current schemes by the introduction of best practice codes or other non-statutory regulation; or

Option 3: Commence the powers in Chapter 4 of part 5 of the Tribunals, Courts and Enforcement Act

The only 'regulation' they currently have is I think six are members of DEMSA ( Debt Managers Standards Association) which has a voluntary code of practise (they face very hefty penalties if they don't stick to DEMSAs code of practise, such as being kicked out of DEMSA ooo noooooo.)

and of course the consumer credit licence, which as we all know is a little wishy washy with regards actually being fit and proper.

The OFT also have a debt management guidance publication dating from 2008 ( OFT 366 ) and have recently gained undertakings from a number of companies to improve transparency particularly in relation to fees.

these are the main problems identified:

Inadequate/inappropriate advice given to debtors by DMP operators;

Awareness and level of fees and charges levied by commercial DMP operators;

Quality of financial statements being delivered to creditors by DMP operators, including the potential manipulation of figures to present an ultimately unsustainable plan in a favourable way;

Poor service provided to clients by DMP operators, including withholding monies and/or making late payments to creditors;

Continued application of interest and fees to debtor accounts by creditors/debt owners, despite a DMP being put in place to service those debt repayments;

Continued enforcement action to collect outstanding debts by creditors/debt owners, despite a DMP being put in place to service those debt repayments.

so the move is needed in my opinion, just how strong does it need to be ? and which will benefit consumers and creditor equally.

[Amethyst]

Re: MOJ review Debt Management regulation

Started on a response (briefly) yesterday

Debt Management Schemes consultation paper

Q.1 Are these objectives reasonable and attainable?
Yes


Q.2 Is there evidence of problems in the current system?
Yes

Q.3 If so, how significant and frequent are these problems?
(wider than you think lol)

Q.4. Would this approach meet any/all of the objectives in paragraph 43?
No

Q.5 Should the Government follow Option 1 and do nothing beyond measures underway?
No


Q.6 How well are the existing codes of practice working?

Q.7 How effective is the enforcement of existing codes of practice?
not very

Q.8 Are there any features which you would like to see as part of the existing codes of practice?


Q.9 Would this approach meet any/all of the objectives in paragraph 43?
No


Q.10 Should the Government follow Option 2 and promote a code of practice/non-regulatory approach?

Q.11 How should such a code of practice/BPM be monitored and by whom?
Comments

Q.12 Would this approach meet any/all of the objectives in paragraph 43?
Yes

Q.13 Should the Government follow Option 3 and introduce a regulated approach?
Yes


Q.14 If option 2 or 3 is introduced, should advice, including the use of a comparison table, be provided as a requirement?
Yes



Q.15. If option 2 or 3 is introduced, should there be a limit on the total amount of debt included in a plan?
No

Q.16 If Yes, what should the total debt limit be?

Comments

Q.17 If option 2 or option 3 is introduced, should plans have an asset cap?
Yes – but not a set figure – a percentage of the debt – ie more that 25% of debt value in assets then pay off etc


Q.19 If an asset cap is introduced, how should assets be valued?
Same as for bankruptcy


Q.20 If introduced, should statutory debt repayment plans be time limited (option 3) or should a time limit be included in a code of practice (option 2)?
No – or would be same as IVA ?


Q.21 If Yes, what should the maximum time limit be?
6 Years?


Q.22 If option 2 or 3 is introduced, should there be a minimum payment rate?
Yes


Q.23 If Yes, what should the minimum repayment be?
£50 as per DRO


Q.24 If either option 2 or 3 is introduced, should any repayment plan have an element of debt write-off?
Yes
Dependent on circumstances

[Amethyst]

Re: MOJ review Debt Management regulation

Would any one like to have any input into this before I start on a first draft ? Will post and ask for input after ?

[righty]

Re: MOJ review Debt Management regulation

Although not of direct issue here I do think it's important for ALL of the agencies to sing the same song & I realize any critizism fo the OFT will have to be muted but iof you could fin d some way to introduce a 'request' that they enforce thier bleeding rules & in particular their 'undertakings' that might be good. AS why are CMC's not having their CCL's revoked why are we reliant entirely on th MoJ to police the system

I & others no doubt know of at least 2 dca's who have given very specific undertakings yet continue to flout them wholsale but nothing happens despite the OFT being repeatedly informed of this

THis does not bode well for their enforcement of any CMC's CCL's

[Amethyst]

Re: MOJ review Debt Management regulation

The MOJ have recently stated they are not there to handle complaints their job is purely regulatory. Which is true enough, however when faced with 400 complaints about one company they surely should see this as reason to investigate and enforce their regulatory powers.

Consumer Direct/Trading Standards seem to be the place to complain to for 'action' individually and copy it to the MOJ.

Also the Financial Ombudsman will handle individual complaints as per the banks.

Breach of DCA undertakings with the OFT - do they have a clause in the agreement for undertakings what happens if they breach these ?

I think we need a much clearer picture of how these agencies/regulators work together and the best way to get complaints heard and actually acted upon.

[TUTTSI]

Re: MOJ review Debt Management regulation

That means that the MOJ and the OFT are both as spineless and useless as each other when it comes to dealing with consumer complaints. They just want to register people, and take their fees but they do not want the job of monitoring the CMC's bad trading habits.

It is just another money spinning exercise and the TS are just as bad IMHO.

[righty]

Re: MOJ review Debt Management regulation

The purpose of these agencies is to enable them to pass the buck to one another without actually doing anything
------------------------------- merged -------------------------------
Also if they don't police them why do CMC's need to register with them Bit of a pointless exercise I'd have thought............ other than collecting fees of course whers the benefit?

[Amethyst]

Re: MOJ review Debt Management regulation

Status: Open
Open date: 18 September 2009
Close date: 18 December 2009
A consultation on a range of possible options for improving the way that many debtors deal with indebtedness. These options provide an opportunity for people to be able to repay their debts in a controlled and managed way.

Consultation paper

• Debt management schemes - consultation paper (PDF 0.28mb 56 pages)
• Debt management schemes - impact assessment and annexes (PDF 0.50mb 58 pages)

[Tools]

Re: MOJ review Debt Management regulation

Interesting, will have a good read of that in conjunction with :-

• [PDF] A Better Deal for Consumers - Delivering Real Help Now and Change ...

• Chapter 4 Debt management schemes Paragraphs 109 - 133

• The Insolvency Service’s guide “In Debt? – dealing with your creditors

• [PDF]Insolvency Act 1986

• Debt Management Guidance

Amongst other links within the consultation.

Looks like something we could submit a response to?

Does anyone have any suggestions to put forward?

[Amethyst]

Re: MOJ review Debt Management regulation

Debt management under spotlight


Companies negotiate on behalf of people who are having debt problems

A watchdog is to put the largely unregulated UK debt management industry under the spotlight to ensure fair treatment for customers.
Cases of misleading advertising and poor debt advice have prompted the review by the Office of Fair Trading.
Companies in the sector tend to negotiate on behalf of consumers to reduce their debt burden.
But fees are added to the repayment amount and vulnerable customers can end up in a worse financial position.
About 100,000 debt management agreements are reached every year in the UK.
'Complex'
The OFT said that the sector had become increasingly complex, featuring many new businesses and more online advertising, as a growing number of people sought debt advice.
This review will help us identify those practices that are harming consumers


Ray Watson, OFT

This has come hand-in-hand with a rise in complaints, warnings about illegal cold-calling and the emergence of copycat websites that look as though they have come from the government or debt charities.
As part of the review, consumers will be asked to fill in a form online if they have concerns about certain companies.
"A recent increase in formal OFT enforcement action, rising complaints and new problems emerging in the market suggest that some businesses are still not meeting minimum standards," said Ray Watson, OFT director of consumer credit.
"This review will help us identify those practices that are harming consumers, as well as the reasons for non-compliance, and will help us target our enforcement action."
The results of the review will be published next year.
Separately, the Ministry of Justice is consulting on whether a code of practice or formal regulation should be introduced into the debt management industry.
It is expected to conclude in December and the government will make an announcement early next year.

[Amethyst]

Re: MOJ review Debt Management regulation

Press releases 2009


OFT announces review of debt management practices

130/09 3 November 2009
The OFT has today launched a review of compliance levels across the debt management industry.
The aim of the compliance review is to gain a deeper insight into the evolving practices of debt management firms. The review will inform any subsequent revision of the OFT's debt management guidance and could lead to the OFT taking formal action to stop any identified consumer harm.
The review will include a sweep of online debt management advertising, an online form for consumers wishing to complain about a licensee and a questionnaire to licensees involved in debt management.
Since the OFT's last compliance review in November 2003 the debt management market has changed significantly. The sector has become increasingly complex with a rapid increase in new entrants and a diverse range of business models, including a rise in internet-based advertising. This comes as more and more consumers seek help for debt problems.
The OFT has already taken action against non-compliant traders in the market. Since April 2008 the OFT has undertaken 24 formal actions to either obtain undertakings, impose requirements, or refuse or revoke credit licences held by debt management businesses. The OFT has also warned the industry over misleading IVA mailings, 'look alike websites' and cold-calling.
Proactively tackling problems in the debt management sector is a high priority for the OFT as there is significant risk that consumers who suffer from distressed debt could end up in a worse, rather than better, financial position. Misleading advertising and poor quality debt advice can result in consumers being sold costly debt remedies that are inappropriate to their needs.
Ray Watson, OFT Director of Consumer Credit, says:
'A recent increase in formal OFT enforcement action, rising complaints and new problems emerging in the market suggest that some businesses are still not meeting minimum standards. This review will help us identify those practices that are harming consumers, as well as the reasons for non-compliance, and will help us target our enforcement action.'
A report on this review will be published in 2010.
NOTES
1. Traders who wish to operate in the debt management sector must hold an appropriate consumer credit licence. The consumer credit licensing regime was set up by the Consumer Credit Act 1974 (the Act) to protect the interests of consumers. The OFT has a duty under section 25 of the Act to ensure that only those who are fit and competent are given and retain a licence. Section 25 of the Act confers an ongoing duty on OFT to monitor licensees' fitness throughout the life of the licence, hence the launch of the compliance review.
2. The OFT issued debt management guidance (the guidance) in December 2001 (updated September 2008 to reflect the reforms introduced by the Consumer Credit Act 2006). The guidance sets out minimum standards for debt management businesses that provide debt advice (including free to client) and/or seek to re-schedule customers' repayment of debt and charge for doing so. Key principles relate to the transparency of advertising and promotion of a debt management businesses' services, fees charged to consumers, acting in the best interests of the consumer and keeping the consumer informed. Applicants and licence holders are expected to abide by the guidance.
3. The compliance review will consist of:

• An online questionnaire to licensees involved in debt management, including free to client and fee charging debt management businesses, creditors, trade bodies, consumer advice bodies and trading standards services. For more information, see the Debt Management Compliance Review 2009 section.
• Comment sought from interested parties on compliance with the guidance and how it is used in practice.
• An online form for consumers wishing to complain against a licence holder or applicant.
• A sweep of online debt management advertising.

4. According to the Money Advice Trust's (MAT) 2009 report there are approximately 150 debt management businesses, of which 34 are members of the Debt Resolution Forum (DRF) and seven are members of DEMSA. DEMSA's code of practice was approved by the OFT in 2008 under the Codes Approval Scheme.

5. The OFT has undertaken 24 formal actions to either obtain undertakings, impose requirements refuse or revoke credit licences held by debt management businesses since April 2008. We have also undertaken a number of market facing interventions since 2007 aimed at enforcing compliance with our guidance. These include tackling:

• misleading IVA advertising in newspapers and on websites
• misleading IVA promotional materials sent directly to over-indebted consumers
• websites purporting to be charitable or government organisations to mislead consumers, and
• misleading or unlawful cold calling by telephone.

6. Consumers considering using debt management services should contact www.direct.gov.uk for information about free advice.




Overlaps so working on together now.

[Amethyst]

Re: MOJ review Debt Management regulation

Debt Management Compliance Review 2009

The OFT announced on 3 November 2009 that it is undertaking a formal compliance review of the Debt Management Guidance.
The aims of the compliance review are to assess compliance levels across the industry, identify the reasons for any non-compliance and to obtain feedback on the Guidance itself. The review will inform any subsequent revision of the Guidance.
As part of this we are contacting debt management businesses, lenders, trade bodies, free and independent advice agencies, consumer organisations, local authority Trading Standards Services and other interested parties inviting their views.
We would welcome your feedback and if you would like to take part please use the relevant link to complete a questionnaire. Please ensure that you complete the questionnaire that most closely represents you/ your organisation.

• licensee
• consumer bodies, including free independent advice agencies
• consumer representative organisations
• Trading Standards services
• any other organisation
• consumer complaint form (Word 139kb)

The closing date for completion of the questionnaires is 25 January 2010. We anticipate publishing a report of the review in Spring 2010.
Further details about the compliance review can be found in the press notice or from debtmanagementguidance@oft.gsi.gov.uk. Alternatively please contact us on 020 7211 8318.

[TUTTSI]

Re: MOJ review Debt Management regulation

Does this mean we can put our twopenth in and have our say?

[Amethyst]

Re: MOJ review Debt Management regulation

consumer complaint form (Word 139kb) is for consumers who have had experience of these companies - its a word document and I think I will do an announcement asking people to complete it who have these experience and then cc a copy of it to us too so we can put stronger response in. you think ?

Am working on the independent advice agencies one and will post up the draft for comments and further input (as an official response from BEagles)

[shas]

Re: MOJ review Debt Management regulation

This should be interesting.