Are DMP offered by Payplan and CCCs etc really free?

Sea78

Very interesting thread - I looked into an IVA but I don't want to go down that route due to , like others have said, the equity in my house (or possible equity) and I want to stay here for a while, without a charge (although I know that it is possible still with a DMP). However, with my DMP, although at the moment my DFD is stil a long way off. I hope that my circumstances change and this is brought closer.

However, a lot of people on this forum have DFDs of 10+ years who aren't on DMPs - should they immediately go for IVA? Sorry, off topic...

For me CCCS being free has been a god send, but then if there are hidden costs, at the moment (and in the future) I don't really mind, but it's like anything, if there are hidden costs, and nothing is for free it's like people who say child benefit is wrong as they have to pay for it through taxes despite not having children....

southernscouser

gingersilverfox wrote: »

Ohhh don't start that again. Free DMP's the consumer doesn't pay??? Who pays for it?????

OK the consumer doesn't pay a 1% of what is donated compared to what creditors write-off with bankruptcies and IVA's.

How much exactly do you think they donate to the CCCS?

joolz43

When I deposit £740 into the CCCS' bank on the first of every month, they keep the money till the 25th. They take the interest gained from my and everyone else's payment and that is how they make their money. Secondly, not every company stops interest on a DMP so I continue to pay that sum of money to individual creditors.

gingersilverfox

joolz43
See quote from OFT Debt Management Guidance

"Any monies held on behalf of consumers must be kept in a client account not usable by the DMC for the purposes of its own business. This includes, in particular, any deposit which under the contract may be returned to the client at any date in the future and any monies received by the company for payment to creditors. Any interest earned on this account should accrue to the benefit of the client, not the company."

I would suggets you scruntise your statement details to see if what happens to any interest.

gingersilverfox

SS
CCCs receive approximatley 10% from the financial institutions for handling DMP's. Factor in the additional time the fi's are without their money and admin on their part then the best part of 12-15% of their expected return will be lost. Still I agree DMP's are the most cost effective way of debt recovery.

lonely_2

No, I think the banks would like you to think that was the case, so we continue to demonise people who get into financial trouble. I'm sure the reality is that the banks are making so many billions they can easily swallow up the cost involved when a small percentage of people go bankrupt/down IVA route - without having to pass that cost back on to other customers. Whether they choose to or not is a different matter.

Bankruptcy is not an easy option, you lose everything you've worked for, your finances are scrutinused, you need to justify your position....BUT it is the only way for some people. As long as companies keep making it easy for people who are struggling to get credit (at extortionate rates), you will continue to see bankruptcies rise.

I was off sick last week and the amount of financial adverts I saw during daytime TV was sickening - I must have seen at least 15 in an hour. Most were aimed at people who had bad credit. Who would have been the audience at that time of day? People who are out of work or on low incomes, single mums, etc. The banks only have themselves to blame. Yes everyone is responsible for his/her own actions. But if you are dangling a carrot at someone who is desperate, what do you expect?

By the way, there is no shame in paying back what you owe - as long as you're not sacrificing your life to do so...

southernscouser wrote: »

But don't you think that we as consumers pay more because of people who enter into IVA's and bankruptcy?

I would never slate anyone for going bankrupt. I know what it's like to be swamped in debt and it was all my doing. I can't guess what it's like for the unfortunate ones who suffer through no fault of their own.

But it's becoming far too easy to be bankrupt. And ultimately the consumer pays for it.

With free DMP's the consumer doesn't pay for it.

eek

gingersilverfox wrote: »

Of course they are reccomended, they are set up or financed by the financial institutions. My point is why are the fi's ploughing money into them and who ultimately pays for it. It's analogousto the NHS is it free or do we indirectly pay for it?

Its in the banks interest.

Suppose a customer has £200 to spread across all debts. A private company will take their fee out of it so there is only £150 say to pay the bills. These charities ensure that all £200 is used to pay the bills.

Then its simply a question of whether the banks donation is less than or greater than £50 a month. If it is less than £50 a month than everyone is a winner (you are paying back more each month, and the banks are receiving more).

As for why they hold the money until the 25 they probably do an automated Bacs transfer and its easiest to do this once a month (oh and it gives more time for all the money to get there).

lxpeanut

Companies that charge a fee are making a profit they do not only charge enough to cover costs. CCCS ect are charities, non profit making, this does not mean they dont need money. One of the ways CCCS raise this is by recieving your payment on the 1st of the month paying your creditors on the 25th and keeping the interest made.

There is a cost to the wider public as FI's will recoup the cost of the contributions they make. However this is considerably less than the cost of the people who are on DMPs going bankrupt and not repaying their debt which the FI's would also recoup.

I agree with you that bankruptcy should not be something to be ashamed of but it is not right for everybody. When you go to CCCS they look at your income and outgoings then suggest courses of action based on what you can afford to pay. They do suggest bankruptcy or IVA's where they are appropriate and advise how to get these organised. You however are not forced to follow the advice and they help with the course of action you choose unless it is to run up more debt.

gingersilverfox

eek
You have made my point. Stay with me on this. As I mentioned above CCCs receive 10% from FI's. With other associated cost the FI's stand to gain at worst 85% of their money back. Fee charging companies (I am not advocating there use) charge on average 17.5% with a setup fee. Now these companies have been described as money grabbing scum which I would not probably argue with, but looking at the figures they are not really. Obviously compared to free DM companies they are!

So my argument is two fold. Firstly the cost of free DMC is not really free and secondly what is driving them to act on behalf of the debtor? The drive for the free DMC is producing the highest return to the FI's. Therefore DMP without any debt forgiveness will be the most favoured. Next would be either interest fixed or frozen. The lack of competition in the market place will mean that DMP without debt forgiveness will be top dog. Which is why the government are planning in bringing in something more formal similar to the Scottish Debt Arrangement Plan mention previously.

AGB863

Let me just throw this in

When a Financial Institution make a grant to any organistion it is usually the charitable trust of the FI that does it, therefore any fund that the FI donate to the trust usually has tax exemptions for the FI out of their enormous profits.

So it can be seen as a win win situation for the FI's