How a DMP is recorded on your credit files (AP or Default)

Willing2Learn

Hi,

We are always getting a lot of questions about how a DMP is recorded on your credit files. The following is from, what I believe to be, the latest guidance:

Debt Management Programme
A debt management programme (DMP) is when a third party debt adviser negotiates a repayment schedule for all or a number of a consumer’s credit agreements.

If the plan is accepted by the lender, the record filed at the credit reference agencies must reflect that the consumer is on a DMP. For such accounts arrears may continue to be calculated in accordance with the contracted terms, but the account marked as under a DMP.

Unacceptable or Token payments
If your lender does not agree a reduced or revised payment with you because the amount you offer to the lender is not acceptable, for example, a very low or token payment, the account will not be reported as an arrangement.

Any payments you make will be reflected in the current balance, arrears will continue to accrue and a default may be recorded.

The guidance then goes on to say:

If you fall into arrears on your account, or you do not keep to the revised terms of an arrangement, a default may be recorded to show that the relationship has broken down.
As a general guide, this may occur when you are 3 months in arrears, and normally by the time you are 6 months in arrears.

I am a bit unclear on exactly what this means. From my interpretation it seems to indicate that if you enter a DMP before the account is defaulted, then your file should be marked with AP marker (Arrangement to Pay), and that the AP will be recorded continually until the account is settled. This in turn I believe, would mean that the negative data will be recorded on your file for six years from when the account is settled. A default will only be recorded when a debtor breaks the AP or when the debtor makes unacceptable or token payments. A defaulted account is automatically removed, six years from the date of default.

Is this interpretation correct, as it differs to the original ICO guidance??? I have been using the latest guidance for the last year or so...but I am a touch confused as the goalposts have been moved...

http://www.scoronline.co.uk/sites/default/files/high_level_prinicples_document_final.pdf

sourcrates

Yes you are basically correct in your assumption (above) guidence can be interpreted in different ways by different people, but you have the essential gist of it there.

If an arrangement is accepted, it will be marked as AP for the duration, and for a further 6 years after the final payment.

On the other hand, if the creditor does not accept the plan, then a default can be registered against that account, personally I find this much the preferred option as it affects you for 6 years, then its gone, AP markers can stay much longer.

Once the new regulated debt mangement plans are introduced, (when the new government sorts itself out) this issue should resolve itself, until then, its up to the debtor to deduce the best plan of action themselves in order to limit the damage done to their credit files, however its awareness of the problem that is, well, the problem, official advice is to get into debt mangement as soon as posible, wearas my advice would be to wait 6 months, don`t pay anything, get all your accounts defaulted, then look at debt mangement.

However this approach appears to be "too radical" for the likes of stepchange, and others, there appears to be a dis-connect between official advice and common sence.