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Annual Report 2009

CONTENTS

  1. REPORT OF CHAIRMAN
  2. CODE OF CONDUCT
  3. MONITORING OF THE CODE
  4. COMPLAINTS HANDLING
  5. COMPLIANCE AND DISCIPLINARY ISSUES
  6. CONCLUSION

CHAIRMAN’S REPORT

Since the final approval of the DEMSA Code of Conduct in November 2008 we have been promoting the Code to the Debt Management Industry and over the year covered by the report (to 31 December 2009) have concentrated our efforts on maintaining the discipline of monitoring our members’ activities to ensure that they fully meet the Code requirements, and by encouraging other debt managers to join the organisation by submitting themselves to the stringent audit requirements.

During the year we welcomed four new members and with the membership now DEMSA members account for 60%+ of the total industry. We expect to welcome a further two new members early in the new year, having completed the audit requirements and there is a substantial pipeline of applicants wishing to join.

The general economic situation in the UK has resulted in a large increase in the demand for debt solutions services and it is clear that the private sector debt managers represented by DEMSA provide a valuable resource to the consumer in helping them manage their financial situations.

A feature of the market during the year has been the emergence of claims management companies who offer, for a large upfront fee, to have debts written off by challenging the validity of the original agreements. DEMSA members play no part in this industry and we are pleased to see that the MoJ has been taking action against some of these operators.

We have also seen several instances of non-DEMSA accredited companies attempting to use the DEMSA and OFT logos to give themselves credibility in the market and where this is discovered firm action has been taken.

DEMSA has been involved in the ongoing review being conducted by the Office of Fair Trading of the Debt Management Guidance, which forms the foundation of our Code of Conduct, and our Code will be reviewed again in 2010 in the light of this review

Additionally we have submitted a detailed response to the Debt Management Consultation document issued by the MoJ/BIS and we await the results of this consultation with interest.

Our Code monitoring activity continues to produce good results, covered later in detail in this report

DEMSA, and it’s members remain committed to raising standards within the debt management industry and we firmly believe that our Code, and the importance attached to it by the achievement of the OFT approval is of strong benefit to vulnerable consumers in the  UK.

Michael Land

CHAIRMAN

CODE OF CONDUCT

The DEMSA Code of Conduct was launched in 2002 and received formal approval by the Office of Fair Trading under the Consumer Codes Approval Scheme on 5th November 2008.

The Code is intended to cover key areas of concern to the consumer, who at the time of approaching such an organisation are at a vulnerable stage and who need careful counselling and who need to be given the best advice.

The key areas covered are:

  • Clear, accurate and truthful advertising of debt management services
  • The provision of clear, transparent¬† and accurate information to enable a consumer to make an informed judgement, including written estimates and cancellation rights
  • Fair, clear and transparent terms and conditions
  • Proper handling and disbursement of clients monies
  • Best advice and acting in the clients interests at all times
  • Fair and easy to access complaints procedures

The Code is a dynamic document and reflects fully up to date legislation, practices and consumer concerns and will continue to be subject to review to ensure that it fully covers the relevant issues in the market place.

PROMOTION OF THE CODE

The Code is an important asset for the accredited members of DEMSA and both DEMSA and the members continue to promote the Code by ensuring that all consumers are aware of the Code and by including the DEMSA and OFT logos on all marketing and promotional material an websites.

The DEMSA website has been fully rebuilt to emphasise the importance of the Code, since gaining full approval, and within the debt management industry DEMSA continues to promote the existence and value of the Code and the OFT approval.

MONITORING OF THE CODE

Monitoring of the adherence of members to the Code, is an important aspect of ensuring that the effectiveness of the Code is properly tested and shown to be sufficiently robust to ensure the required level of consumer protection.

The effectiveness of the Code of Conduct in maintaining standards is assessed by:

  • Web Sweeps and Desk Top Analysis
  • Customer Satisfaction Surveys
  • Compliance Audits
  • Mystery Shopping
  • Complaints Handling
  • General Information Received

Further Information on the separate areas of monitoring undertaken follows.

Web Sweeps and Desk Top Analysis

The Marketing of Debt Management Plans and other financial solutions provided by members of DEMSA is closely monitored to ensure that consumers are being provided with transparent, clear and truthful information regarding these products and services.

DEMSA undertakes regular reviews of members’ advertising (on a minimum quarterly basis) of all advertising placed on websites and with other media including TV, Radio, Press and electronic messaging.

Customer Satisfaction Surveys

The Customer Satisfaction Monitoring has continued during the year by means of the established Customer Satisfaction Survey, expanded to include new members on joining.

The Survey asks the consumer to give their views on a number of different areas:

  • Initial Contact
  • Information Provided Before Contract
  • Written Information Provided
  • Operation of Debt Management Programme
  • Overall Satisfaction

A weighted scoring system has been designed to give priority to fundamental issues covered by the Code of Conduct and this gives ratings from “Excellent to “Poor”

CSS SURVEYS ISSUED/RESPONSES RECEIVED

2006

2007

2008

2009

CSS Surveys Issued

2208

2411

2505

3001

Responses Received

525

619

562

632

Response %age

24

26

22

21

A targeted response return rate is set at 20%

DETAILS OF RATINGS ACHIEVED

2006 2007 2008 2009
Number %age Number %age Number %age `Number %age
Excellent

290

55

362

58

332

59

368

58

Good

133

25

141

23

117

21

132

21

Satisfactory

43

9

55

9

45

8

58

9

Below satisfactory

18

3

26

4

29

5

20

3

Poor

29

6

30

5

39

7

50

8

Spoiled

12

2

5

1

0

0

0

0

Totals

525

100

619

100

562

100

632

100

In 2009 88% of all respondents produced scores which were rated satisfactory of better, exactly the same as in 2008, however a small increase to 8% from 7% in those responses which attained a score ranked as poor was evidenced

The statistics outlined above were based on the weighted scoring system but the following points were highlighted by the individual answers to the survey

Comparisons with the 2008 figures appear in brackets

Initial Contact

  • 1% (2008 1%) of respondents thought that their debt manager was not helpful and courteous at all times (Qu2a)
  • 1% (2008 1%) did not think their debt manager fully explained all the options available and offered useful advice (2b)
  • 2% (2008 2%) did not fully understand the nature and extent of the service offered (2c)
  • 2% (2008 3%) were not made aware of the cost of the service

Information provided before contract

  • 5% (2008 8%) were not made aware of their debt manager‚Äôs membership of DEMSA (3a)
  • 6% (2008 8%) were not made aware of the Code of Conduct (3b)
  • 2% (2008 3%) were not made aware that fees would be charged (3c)
  • 4% (2008 3%) were not made aware that creditors were not bound by any proposals (3d)
  • 2% (2008 3%) were not made aware of the importance of prioritising debts (3e)
  • 3% (2008 3%) were not made aware of the possible implications of entering into a debt management plan (3f)
  • 3% (2008 3%) were not made aware of what would happen to the first payment under the plan (3g)

Written Information Provided

  • 4% (2008 3%) did not receive a written best estimate of the total cost (4a)
  • 3% (2008 3%) believed that contracts were not clear and easy to read (4b)
  • 2% (2008 4%) did not have details of DEMSA and the Code of Conduct included with their documentation (4c)
  • 9% (2008 7%) were not made aware of how withdrawal from a plan could be effected (4d)

Operation of Debt Management Programme

  • 3% (2008 2%) felt that they had not been kept up to date with progress(5a)
  • 3% (2008 2%) felt that it was not easy to make contact (5b)
  • 2% (2008 1%) felt that calls had not been dealt with properly (5c)
  • 2% (2008 1%) felt that correspondence had not been dealt with promptly (5d)
  • 2% (2008 2%) did not feel that the programme had provided support and financial advice/education throughout (5e)
  • 1% (2008 1%) did not feel that the programme was relevant to their needs (5f)
  • 2% (2008 1%) did not feel that any complaints or queries were handled promptly and properly (5g)
  • 3% (2008 1%) were not aware that the debt manager reviewed and reassessed the plan on a regular basis (5h)
  • 0% (2008 1%) did not feel that payments had been passed to creditors as arranged. (5i)

Overall Verdict on DMP’s

  • 2% (2008 1%) felt that the debt management programme had not met their expectations (6a)
  • 1% (2008 1%) felt that the debt management programme had no effect on making their financial commitments more manageable (6b)
  • 2% (2008 2%) felt that the debt management did not represent value for money (6c)
  • 2% (2008 1%) felt that the debt manager had not handled the programme to their entire satisfaction (7a)
  • 1% (2008 1%) gave an overall rating of poor (7b)
  • 3% (2008 3% were not experiencing more financial peace of mind as a result of entering into a programme (8a)
  • 8% (2008 8%) were not experiencing less creditor pressure (8b
  • 2% (2008 2%) thought that overall the programme had not improved their ability to cope with their financial affairs more easily. (8c)

Comments on Results and Action Required

Whilst only 6 respondents out of a total of 632 (0.94%) actually recorded an overall rating of poor on their surveys the scoring system recorded that 50 responses (8%) were given a poor rating.

This is as a result of the weighting system employed in the scoring where failure to achieve the perceived standard on one question leads to an increasing score on other questions in the section, with the intention being to highlight areas where less than satisfactory service is being provided.

All individual cases where relevant further action was deemed necessary have been referred back to the individual member and the complaint or comment fully investigated and action taken where necessary.

The results of the Customer Satisfaction Survey forms an integral part of the annual members audit undertaken.

Conclusion

Whilst there have been some minor deviances from previous results, the overall results show that 99% of all respondents felt that the debt manager handled the programme to their entire satisfaction and the same proportion, 99% rated the service provided as satisfactory or better.

Compliance Audits

All members are subjected to an annual compliance audit which incorporates into it details and results from both mystery shopping and consumer satisfaction surveys.

The audit looks at various areas:

  • Marketing, Promotions and Advertising
  • Pre-Contract Activity
  • Contract Terms
  • Payments and Money Handling
  • Contact with Consumers and Advice
  • Business Status, Practices and Procedures
  • Skills, Knowledge and Experience
  • CCAS Core Criteria Checks
  • Provision of IVA‚Äôs

Any member not achieving the required standard is subject to strictly determined action planning to correct the issues and in the event of failing to achieve the required outcomes disciplinary action, including suspension or termination of DEMSA membership can be invoked.

No such action was taken in 2009

Mystery Shopping

All members of DEMSA, and those applying to join, have been the subject of a rigorous telephone mystery shopping exercise which took place in November and December 2009.

The survey was carried out by an independent organisation specialising in this area. The purpose of the exercise is to monitor the interface between debt managers and their clients and to confirm that full and transparent information and best advice is given to consumers at all times. Close monitoring takes place in the following areas:

  1. Understanding of Debt Management Programmes
  2. Adequacy of Information Provided
  3. Costs and Estimates
  4. High Pressure Selling
  5. Cancellation and withdrawal rights
  6. Awareness of DEMSA and the Code of Conduct
  7. Provision of IVA’s

Individual calls can last up to 90 minutes and consist of a great deal of fact finding and the sheer length of the call can lead on occasions to minor omissions.

However in the key areas outlines below performance ranked generally higher than the 75% aimed for.

  1. 89%
  2. 74%
  3. 81%
  4. 80%
  5. 43%
  6. 59%
  7. 62%

Overall 71%.

In the exercise which comprised in total 100 calls there were 3,060 possible failures on issues not properly covered and there were only 129 (4%) actual failures recorded

All members have fully reviewed their procedures in the light of results obtained and this monitoring by way of Mystery Shopping will be continued and carefully assessed.

Complaints Handling

Complaints Handled by DEMSA

In total 7 complaints were handled by DEMSA during 2009  which is an increase over 4 the previous year. However with the increase in DEMSA membership over 150,000 active debt management plans are held by members. The issues covered were as follows:

Services Issues                                                            -            1 complaint

Issues regarding formulation of a DMP                        -            3 complaints

Issues regarding withdrawal from a DMP            -            3 complaints

2 complaints were justified and resulted in repayments being made and one complaint related to the actions taken by a creditor, over which the debt manager had no control.

All complaints were satisfactorily resolved following referral to DEMSA and total refunds of £400 were made along with an ex gratia payment of £125.

The trend of complaints against DEMSA members over recent years is as shown below:

2004 2005 2006 2007 2008 2009
Number of Complaints

14

8

11

9

4

7

Service Issues

8

5

9

5

2

1

Formulation Errors

2

0

0

1

1

3

Withdrawal from a DMP

3

2

2

3

1

3

Amounts disputed

1

1

0

0

0

0

Refunds Made (£)

1220

1093

1938

786

370

400

Ex Gratia Payments Made (£)

1350

480

740

300

50

125

All DEMSA members are aware of and offer to their customers the services of the Financial Ombudsman and consumers have the right to use this service if they so wish. In the event of a complaint referred to DEMSA not being resolved to the consumers’ satisfaction, they have the right to invoke the FOS service.

COMPLIANCE AND DISCIPLINARY ISSUES

Compliance and Disciplinary Procedures are in place, which give strength to the Code by their structured, binding and independent approach.

An Independent Panel is in place to consider any actual or potential breaches of the Code and to decide on any disciplinary action, which may need to be taken.

The panel is convened on notices of a potential breach of the Code from any of the following sources:

  1. A Consumer Complaint
  2. As a result of a Compliance Audit
  3. As a result of information received from any other form of monitoring of the Code undertaken by DEMSA which will include Mystery Shopping and Customer satisfaction Surveys.
  4. A complaint from another member
  5. A complaint from another source, including lenders and other consumer bodies.

During the year under review it was not necessary to take action against any member.

CONCLUSIONS

The continuation of monitoring of DEMSA members is an important tool in the aim of ensuring the provision of a high quality, effective and fair service to consumers who may be particularly vulnerable at the time of entering into a plan.

There were some disappointing results from the Mystery Shopping but this was a completely new and upgraded project which has had a few teething problems to start with. The process will be repeated on a continual basis throughout the year, and trends carefully analysed.

With the impending review of the Debt Management Guidance and the Debt Management Consultation it is clear that the industry in general, and DEMSA members in particular are going to have to continue the improvement in standards or risk falling into a non – compliant state. Following the reissue of the Debt Management Guidance the DEMSA Code of Conduct will be fully reviewed and our monitoring procedures updated as necessary.