Who is suitable for a Debt Management Plan?
The controversy surrounding debt management has been unavoidable recently, with everyone from the Daily Mail to the OFT doing their own investigations into companies who provide the service.
Whilst much of the criticism is unfair, it raises a good question as to the kind of customer suitable for these plans. With bankruptcy and Debt Relief Orders losing their stigma and with companies such as Varden Nuttall Ltd able to propose IVAs for customers with as little as £10,000 debt and £140 disposable income, there seem to be fewer people choosing debt management plans than ever before.
It’s not surprising- for an individual with £10,000 debt able to afford £140 per month a debt management plan may take over 8 years to repay, depending on fees, charges and interest. An IVA in the same situation would give the individual the security of a fixed payment and a fixed end date, generally in only 5 years. With the criteria for IVAs becoming more and more generous, the criteria for advising a debt management plan seems to be steadily shrinking. Consequently, many debt management providers are re-assessing their existing debt management customers to ensure that the original advice given is still the best advice.
There is clearly still a market for these plans. Many individuals struggle to deal with the stress and time of negotiating with their creditors, and these individuals are often happy to let a company do this for them professionally for a reasonable monthly fee. But with regulation of debt advice looking likely and increased consumer awareness of the charity sector, it seems as though turning a profit in the private sector is becoming increasingly difficult.
Now more than ever it is important for a company to get a good reputation for providing clear and honest advice, and ensuring that their advisors take every option into account before recommending a solution.
