Are DMP offered by Payplan and CCCs etc really free?

southernscouser

gingersilverfox wrote: »

Setting up a DMP is expensive and involves a lot of paper work and admin.

Does it? Do you have figures to hand?

The financial institutions subsidies these companies to do this.

No they don't. They donate money to say the CCCS who will then use it how they see fit.

Financial institutions do not do this to feel better about themselves there are sound business reason for this.

No they do it to hopefully prevent bankruptcy's so they can recoup most of their money/profits.

Who really pays for this? Not the banks etc but us, the general public who endure more expensive credit agreements and threats of paying to use banks.

We all pay for it in one way or another just like everything in life.

Do the "free companies" negotiate debt forgiveness, fix the total amount payable or do nothing and leave the debtor a hefty lump sum to pay at the end of the DMP?

The free (no quote marks) companies come to an arrangement with all creditors on a fixed monthly repayment plan. They try to negotiate interest being frozen as it is in all parties best interest. They DO NOT leave customers with a hefty lump to pay at the end. Firstly because there is no official end as such. The agreement has no time limit. It is paid until it is paid off. Secondly thats not what a DMP is. You might be thinking of an IVA.

This is important to know before entering into a DMP. The answer to this question will answer whether we can compare free companies with fee charging companies.

There is no comparison. Fee charging debt management companies are blood sucking scum.

Debate point- should we blindly use free companies such as Pay Plan or CCCs for debt management OR should we shop about and compare how much a DMP costs over the duration of the plan.

"There's is no such thing as a free lunch"

I don't think you grasp how this all works. Joe Bloggs goes to the CCCS and they negotiate a total of £500 per month is paid to his creditors. Every penny of that £500 goes to the creditors.

Jim Bloggs goes to a fee charging debt management company. They negotiate that £500 goes to his creditors every month. Out of that £500 the debt managment company takes £100 to line their own pocket which means only £400 goes to their debts. The maths is simple. By going to a fee charging company it will take longer to pay off your debts.

If that isn't enough, creditors are more likely to reason with someone like the CCCS. Why? Because they know that every penny the debtor hands over to the CCCS comes back to them.

It's quite simple really.

rustybucket

Hopefully SS, that will answer gingergrey questions.

Well put I have to add as well

Oldernotwiser

I think that the point that GSF is making is that as CCCS/Payplan receive their funding from the creditors, there may be a conflict of interest in the arrangements. This has been commented on before.

scotsgirl_3

Oldernotwiser wrote: »

I think that the point that GSF is making is that as CCCS/Payplan receive their funding from the creditors, there may be a conflict of interest in the arrangements. This has been commented on before.

I see where you are coming from, however, not all financial instituations support CCCS/Payplan etc, and the payments are still distributed evenly between the creditors - this to me suggests that the agreements are impartial.

to go back to the OP's original comments, my thoughts are

1: Yes, ultimately the cost of so called "bad" debts is bourne by people borrowing money through higher intrest rates - if no one ever defaulted on an agreement then lending rates would be lower. Financial institutions also have to factor in the costs of customers going bankrupt or into IVAs etc - in most instances it would make more sense to subsidise a company like CCCS, where the idea is that the company gets all of their money back, albeit over a longer time, than not helping and possibly causing more people to go bankrupt who would rather pay.

2: I have personally never seen a DMP where " debt forgiveness" is negotiated at the outset. A DMP does not mean not paying back everything you owe, it means paying it back at a rate that you can afford, over a longer time, and normally stopping more interest being added. Fee paying companies do not reduce the amount owed ( although in my experience they seem to give a lot of people this impression)

Personally, I really dislike fee charging DMA's. The rates some of these companies charge are ridiculous. Having dealt with numerous debt management agencies ( and their customers) in the course of my job, I do believe that those who deal with CCCS/Payplan/CAB etc are better off for the following reasons

1: all the money they pay each month goes to servicing their debts. I have seen numerous SOA's from companies such as Baines and Ernst, Gregory pennington etc ( to name but a few) where a fairly hefty percentage of their monthly payments is being kept by the company ( i have seen many cases where the DMA is keeping around 20% of the monthly payment.:eek: ) What is the point in your creditors freezing interest if a DMA is going to keep your money instead!

2: in my experience, creditors are generally more willing to freeze interest and fees when dealing with a free company

3: It's more common for fee paying customers to be misinformed about their DMP. For example, I have dealt with numerous customers who have signed up to, say, a 5 year agreement with whichever company they are paying, and been led to believe that at the end of this they will be debt free, when this is not the case as their debts won't be cleared.

gingersilverfox

SS
Re cost of debt management,
"It cannot be deemed unreasonable for these debt management companies to charge for such a service, as there is indisputably a high volume of administration required for each arrangement."--Pay Plan

Re subsidise/donate.
There is no real difference but that is another debate.

southernscouser wrote: »

No they do it to hopefully prevent bankruptcy's so they can recoup most of their money/profits.

You have validated one of my points in that it can be argued that these organisations whose funding is reliant on financial institutions will favour the solution which continues there funding. Bankruptcy or IVA's should be considered by those who meet the criteria. It’s the right thing.

southernscouser wrote: »

We all pay for it in one way or another just like everything in life"

This is not a reasoned approach for the indirect charges levied on us all not to be given.

southernscouser wrote: »

The free (no quote marks) companies come to an arrangement with all creditors on a fixed monthly repayment plan. They try to negotiate interest being frozen as it is in all parties best interest. They DO NOT leave customers with a hefty lump to pay at the end. Firstly because there is no official end as such. The agreement has no time limit. It is paid until it is paid off. Secondly that’s not what a DMP is. You might be thinking of an IVA.

No official end.... what? From my experience there is an end. The time period can be contracted or extended depending on circumstances, but there is an end. I know you are not advocating people should sign up any DMP without timescale. Or are you?

Scum sucking

Debatable too. Having not compared the services of a fee charging company with the services of a free company how can you be so sure? Anecdotally you will be able to do so but not through first hand knowledge. However, I do accept that there are scum sucking companies out there. All these companies should be reported to the OFT or local trading standards

What I am advocating is that free DM companies should charge a fee for their services.

You get owt for nowt.

in_debt_again_but_dealing_with_it

GSF when you enter a dmp with payplan or CCCS you can remain in that plan indefinately - ultimately until the debt is repaid!! Why is that so wrong - repaying money owed is significantly better than not paying at all. Is it right to charge a person, already in financial difficulty, to repay their debt and extending the agony. I'm curious as a newbie mse are you in debt and looking for help or simply stirring?? Personally I'm with cccs and they recommended bankrupcy - I chose dmp because I have no assets and ulitmately want to repay all that I owe - had there been a charged involved for my dmp I may have thought stuff it and gone bankrupt and my creditors would have got nothing - so once again why are "free" dm services so wrong???

gingersilverfox

My experience in this sector spans both private and local government(over 15 years cumulatively). I have dealt with people who have had horrendous experiences from both free and fee charging companies.

In another thread Sensible77 had £77k worth of credit card debts. Paying minimum monthly amount of say 3% would be £2310 or 2.5% £1925. Sensible and partner only earn £2k a month. The man's insolvent!! A DMP is the wrong thing for him. No amount of scrimping and saving (note I scrimp and save) will change this. Signing up to a DMP is so wrong. And yet the advice is to speak to a free DM company and suggesting he starts to scrimp and save.

I'll come to the point. Banks and financial institutions are trying to make bankruptcy a shameful thing. Fact, it's not shameful. Child molesters and rapists are shameful people not bankrupts. In my experience some insolvent people have signed up to lengthy DMP which were not suitable for them because they were habitual borrowers.

Free agencies are not free. I am against hidden charges eg 0% car loans. Point to note: the car is more expensive.

Does the free agencies provide truly independent advice?

southernscouser

Fox man, I don't know what your agenda is but I've not read so much !!!!!! on here in a long time! :rolleyes:

No official end.... what? From my experience there is an end. The time period can be contracted or extended depending on circumstances, but there is an end. I know you are not advocating people should sign up any DMP without timescale. Or are you?

Firstly there is no contract. It is simply an agreement that either party can terminate whenever they want and for whatever reason they want.

Secondly how can you put a timescale on how long it will take to pay off if creditors change their minds whether or not to apply interest to the accounts?

Debatable too. Having not compared the services of a fee charging company with the services of a free company how can you be so sure? Anecdotally you will be able to do so but not through first hand knowledge. However, I do accept that there are scum sucking companies out there. All these companies should be reported to the OFT or local trading standards

What I am advocating is that free DM companies should charge a fee for their services.

Why the hell would anyone want to pay for a service they can get for free?

If they CCCS were to ever start charging for their services then they would start to become biased. All the fee charging companies do not have your best interest interests at heart. They are there to make money out of you.

If you really wish to disregard my points because you have no answer to them thats fine by me. It just goes to show you clearly have no idea or knowledge and are only here to be a wooden spoon. :beer:

scotsgirl_3

southernscouser wrote: »

Fox man, I don't know what your agenda is but I've not read so much !!!!!! on here in a long time! :rolleyes:



You know Southern, I'm inclined to agree with you! :rolleyes:

gingersilverfox

SS
Slip of the keyboard, I meant agreement not contract.

In respect of the !!!!!! (I've got the moral highground now)you say I am espousing, are you referring to my comments about Sensible 77? A man who is insolvent and cannot afford to pay his creditors and probably will have no choice in how to resolve his debt problem or my point that free DM companies are not in essence free?

I think that your apparent annoyance has blinded you to what I am actually saying. Top tip: take a deep breath, relax and re-read my posts.

I am not here to wind up but to stimulate debate and find out what the truth is behind free DM companies. Yes I admit it I'm a cynic. Any others out there?