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Death to Debt Management in the UK

If you’ve read any of my articles by now you might find that I love a good headline. And while Death to Debt Management might seem a bit tabloid, with recent news, it’s not that crazy.

Latest scoop from the industry is about certain creditors that are electing to no longer completely waive interest in debt management plans. These changes should also impact our friends at Payplan and CCCS as well.

Apparently on the heals of the creditor perceived victory over IVA fees and “demonic” Insolvency Practitioners, creditors are setting their sites on the debt management industry as their next conquest. 

The most vulnerable companies in this new battle plan seem to be Payplan and Consumer Credit Counselling Service with their reliance on creditor funding for debt collection efforts. If this comes to fruition, PP-CCCS will have to walk an even tighter rope between being friends of the consumer or satisfying their funding creditors with exceptional collection performance. I would imagine that their performance funding will get cut as well.

Unlike in the US where all debt management plan companies were suckled to the creditor’s bosom for funding because fees were either illegal or discouraged; in the UK the landscape is much different. This difference helps the majority of UK debt management companies to be able to better batten down for the storm.

While the thought of a creditor battle plan against debt management seems ridiculous, it’s not so crazy when you think about how creditors view debt management companies. Creditors don’t like to see debt management companies getting paid for services they render to consumers and creditors feel those pounds should be flowing into their pockets instead. Screw the consumer. What will be next, slower ambulances that get better gas mileage?

Only time will tell if the recent stories about the demise and collapse of Debtmatters are founded, personally I think that with a little cleverness that Debtmatters could pull a victory out of the latest news.

What did really catch my attention though was the story about our old friend Mondi and the headline “Cleardebt Group FY pretax loss widens 27 pct”

You would think that all this slash and burn IVA strife falls into the lap of the business plan at Cleardebt with their enthusiastic low fee model but I wonder if the low fees will hinder them by reducing their acquistion cost per new client.  Apparently that is what Debtmatters is citing as a cause for reduction in business.

But the Cleardebt castle remains confident in their low fee approach and probably feels that things are falling into their lap, The recent Thompson Financial article states, “[David Mond] added that the group's IVA offering, which will cost banks less in fees, helping them see more return from their loans, will 'become the industry standard and allow us to compete for market share on an effective basis'.”

If that is the case it looks like David Mond is welcoming the large reductions in IVA fees paid that will put stockmarket listed companies on the skids and some Insolvency Practitioners out of business.

What concerns me in all of this talk of “cost per” is that we can’t lose focus on doing good things to help people in financial trouble.

Almost forgot to mention, take a look at this IVA.co.uk forum topic if you want to see how Northern Rock has used a forum post by an IP there to support their “fair treatment” of consumers.

Resources: myvesta.org.uk