Card debts - 'One Debt Solution.co.uk' - bad idea??

bigausk

Hi Money savers,

I'm trying to help a friend who has recently told me that she has a total of £2750 in debts spread across three credit crads. She arranged for the company 'one debt solution' to take on the management of the debt and she is paying them £100 a month in an attempt to clear the debt which she ran up as a student.

I wouldn't touch these companies with a ten foot pole but I'm keen to know if anyone has any experience of this company or any similar debt agencies?

What's even more worrying is that her credit report appears to show that she has defaulted on on all three of the cards, and that they haven't recieved any payment for months.

I have advised her to call the banks and ask if they are getting paid, and if so how much each month, and then to contact one debt solution to find out what the state of play is. I'm seriously worried she is throwing a lot of money away and destroying her credit report.

Any advice or comment about this situation and/or the company in question would be much appriciated.

Thanks

apox01

My experience.. I thought a debt management company paid off all your debts, then you paid them back, like a type of loan. When applying for a debt management company myself I realized all they do is give the banks a little bit at a time. I have a friend who has one, pretty much the same as your friend. Every day she receives threatening letters from her lenders demanding money, she has to forward them to her debt management company and they will deal with it.

I know this doesn't help you, but these kinds of company's are a BAD idea. And its near impossible to get out of.

Hax

Wow - that's a lot to be paying each month in management fees!

It sounds like they've set up a Debt Management Plan for your friend - something which you can get arranged for free through the likes of the CCCS.

Even so, if that is the case, then their fees are extortionate - I used to have a DMP with a company called Gregory Pennington and their fee was about 10-15% - can't quite remember now, it was a long time ago! Do you know how much her total monthly payment is? £2750 isn't a huge amount of debt in the grand scheme of things and I would be surprised if you couldn't arrange a personal DMP for payments of £100/month with no extra charges which would see these debts cleared in just over two years!

Just a few late night, ramblings!

Please post back if you have any more information - I'm sure others can provide better advice for you

HappyMJ

Considering the minimum payments on a credit card are 3% of the outstanding balance she should be paying them the full amount directly at £82.50 per month. Then trying to reduce the amount outstanding by making additional payments. If the DMP company is charging £30 per month processing fee then she isn't meeting the minimum repayments as there is only £70 left.

The DMP companies usually keep taking payments from a client until the fee has been paid in full before sending anything to any creditors so that's why payments have not been paid for months. They also need the accounts to be in default for a better chance of freezing the interest.

bigausk

Thanks apox01 and hax for your thoughts.

I was pretty sure the management agency was a bad move but she has been paying them for six months already and I only found out this week.

If it was me I would be looking to get a 4th card and with a 0% for 12 months deal on balance transferrs and get all the debt onto one card that I can pay off myself. I suspect now though, that her credit score is so bad she wont get another such card?

Personally I think she is lucky it is only £2750, it could be much worse. But having that around your neck as well as the crippleing credit score is not going to help her get a mortgage or more credit in future (although the latter is probably a good think!)

bigausk

HappyMJ wrote: »

Considering the minimum payments on a credit card are 3% of the outstanding balance she should be paying them the full amount directly at £82.50 per month. Then trying to reduce the amount outstanding by making additional payments. If the DMP company is charging £30 per month processing fee then she isn't meeting the minimum repayments as there is only £70 left.

The DMP companies usually keep taking payments from a client until the fee has been paid in full before sending anything to any creditors so that's why payments have not been paid for months. They also need the accounts to be in default for a better chance of freezing the interest.

This is very interesting. That would explain why the credit report indicates the card companies are not getting paid at all - because she is just paying the company's management fee. Ouch!

Is there any chance if she pulls out of this now she might get some of that fee back? Long shot I know.

All three cards are now showing as defaulted on the credit report so what does that mean exactly in terms of interest charged and fees? (I don't have details of the cards yet but they are RBS, halifax and barcleycard)

HappyMJ

She would need to take the DMP company to court for the excess back there is no chance they will voluntarily send it back.

The late fees would be £12 per month per credit agreement. So she's incurring an extra £36 per months late fees and paying £30 per month DMP fees. And probably £60 per month interest. No wonder nothing has been paid of the original debt.

Get her to stop paying now and start sending letters to the credit card companies to capitalize the arrears and start paying normally again.

bigausk

Thanks happyMJ. That's what I'm going to do. If only she had sopken to me earlier! Still, better late than never.

Does anyone know if it's even worth trying to get all the debt onto a new 0% balance transfer card? I suspect she wont get one but is it worth a shot or just better to set up payments to each card company she is already in debt to?

paulew

After being told numerous 'fairy tales' by One Debt, I've just found out that they have just completed their 'legal work' and that they can't write off any of my loans, nor have they done anything to help me in any way, apart from helping me get two CCJ's which they said they would deal with. All of this for only £1,600!

This is a SCAM & a CON, and I think its disgusting that people should profit from other peoples misery. Some people have no conscience. Unbelievably! I've now made a complain with the OFT. Anyone using One Debt Solution should stop paying them money immediately and use a charity that will help you for free, like Consumer Credit Counselling Service.

RAS

Please male a formal complaint and contact the OFT and Ombudsman

Viktoria_3

paulew wrote: »

After being told numerous 'fairy tales' by One Debt, I've just found out that they have just completed their 'legal work' and that they can't write off any of my loans, nor have they done anything to help me in any way, apart from helping me get two CCJ's which they said they would deal with. All of this for only £1,600!

This is a SCAM & a CON, and I think its disgusting that people should profit from other peoples misery. Some people have no conscience. Unbelievably! I've now made a complain with the OFT. Anyone using One Debt Solution should stop paying them money immediately and use a charity that will help you for free, like Consumer Credit Counselling Service.

Thank you paulew for this information. I have also very bad experience with One Debt Solution. Have been with them for 10 month, paid around £1200, they did not pay any money to my debtors. Now we cancelled our account with them and transferred to another company, but One Debt are saying that we owe them £1400 in fees and do not agree to return money paid to them.

Can you please let me know how exactly can I make a complaint with the OFT or what else can be done to get the money back?