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How to Pick the Right Sort of Debt Management Firm

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Debt Management Firm: A debt consolidation plan is an excellent option for those with difficulties keeping up with monthly debt payments.

Debt consolidation is also known as debt management or credit counselling. All reputable Debt Management firms (DMF) offer their services transparently and fairly, providing you with solutions to pay off your debts.

You must research extensively to find a reputable firm that will not tamper with your credit or money. Check the terms and conditions carefully before committing to any Debt Solutions Company.

How to Pick the Right Sort of Debt Management Firm

You need to consider a few things before choosing the right debt solutions company. Below are some things to help you pick the right debt management firm:

1. Is The Firm FCA Approved?

The FCA must authorise any company offering debt management services, regardless of whether the firm provides free services or charges with a fee.

The firm has to meet minimum standards to be authorised by FCA. This guarantees fair treatment to all clients, and you have the right to file a complaint at the Financial Ombudsman service if anything goes wrong.

2. Look Into The Rules Debt Management Firms Have To Follow

Confirm if the debt solution company is approved by FCA and if it’s a member of any trade association with a code of conduct.

Some debt management firms (DMF) have membership in trade associations with a code of conduct. Meaning they’re audited to ensure they adhere to the code of practice and must follow a set of steps if you have any complaints. If the DMF doesn’t address your grievances, you can refer them to the trade association for investigation.

Debt Managers Standard Association (DEMSA) is the leading trade association for debt solution companies.

DEMSA has a code of conduct validated by the Trading Standards Institute Consumer Codes Approval Scheme (CCAS).

3. Is The DMF A Debt Management Plan Protocol Scheme Member?

Some DMFs have enlisted to the Debt Management Plan protocol established by the government’s Insolvency Service.

Although the protocol’s membership is optional, any DMF enrolled on the protocol is committed to specific standards besides the rules and guidance of the FCA.

You should ask your DMF if they have the protocol membership to verify their standards.

4. How Will The Debt Management Plan Work?

The DMF should tell you:

  • The charges of the Debt Management Plan.
  • The period it will last.
  • The total amount you’ll end up repaying in the course of the Debt Management Plan.

If any of the figures in the contract are estimations, there will be a written warning indicating this. There’ll also be an explanation of what the estimates are based on. The DMF will give you this information in writing once you’ve signed the contract.

Keep an eye out for any providers who say they’ll hold your cash for future repayments instead of paying your creditors straight up. If such a provider declares bankruptcy, it’ll be very difficult to get your funds back.

5. What Are The Charges?

If you aren’t comfortable paying any fees, look at your options and shop for a free DMF.

Your agreement should have details such as ongoing fees, deposits, upfront fees, and any other additional costs. Ensure you’re okay with all the charges before you sign the contract.

The charges should extend throughout your agreement. The costs should not exceed half of your monthly payments, and they should decrease after the initial six months so that a considerable chunk of your monthly payments goes into your debt repayment plan.

6. What Happens If You Terminate The Contract Prematurely?

You can cancel a DMF anytime as it’s not legally binding. That said, some companies won’t reimburse your fees if you terminate the agreement prematurely.

Go through the contract to find out the company’s cancellation policy and if there’s a cooling-off period. Don’t sign the contract until the DMF clears any uncertainties. If you are unsure about something, put it in writing and ask the provider to give more information.

7. What Other Support Do DMFs Offer?

Your provider isn’t required to offer you general money management guidance. However, they have to provide you with free debt advice. Some providers give money management advice on top of their debt management service.

If having a provider with additional support is what you need, make sure you ask them if they offer additional support before signing the contract.

Note: never pay for guidance.

Bottom Line

Selecting the right debt management firm for you can be challenging. However, a good rule of thumb to follow is always to ensure you do a thorough background check of the DMF before entering into any agreement with them.

Remember, choosing a good debt management firm is what stands between you and bankruptcy. Reform Debt Solution is the best firm to go to if you have trouble with debt management.


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