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Annual Report 2013

CONTENTS

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

REPORT OF CHAIRMAN

Having assumed the role of Chairman in October 2013, I would first of all like to pay tribute to Michael Land, who was instrumental in founding DEMSA back in 2000 and under whose stewardship DEMSA has grown to an organisation that now represents some 80% by volume of the fee charging debt management sector. Michael stood down as Chairman in 2013, although remaining as a Board member, and I am sure that all members will join me in acknowledging his immense contribution to the association.

During 2013 membership grew by the addition of two new members, however due to consolidation in the market the actual number of members remained at 21 at the year end. For 2014 DEMSA has increased the range of membership options available which it is hoped will increase our connection and influence across the sector.

The Office of Fair Trading (OFT) closed it’s Consumer Codes Approval Scheme on 31 March 2013 and accordingly our Code was accepted into the scheme operated by the Trading Standards Institute (TSI). Trading Standards has a long standing reputation of protecting the consumer and our Code is a good fit into the TSI scheme, and will continue to drive higher standards.

On the regulatory side we have been exercised during 2013 with firstly the introduction of the Debt Management Plan Protocol and secondly the inception of the Financial Conduct Authority, due to take responsibility for Consumer Credit on 1 April 2014.

DEMSA has been involved from the outset in the formulation and the introduction of the DMPP, which was headed by the Insolvency Service. Upon introduction on 1 October 2014 a substantial numbers of DEMSA members were accepted in to the Protocol, with the remainder committed to becoming compliant by 1 April 2014.

The Financial Conduct Authority issued it’s consultation in December 2013 and DEMSA will be responding and will continue to work with the FCA to ensure that proper rules are established with effect from 1 April.

The coming year of 2014 will be a challenging one for the sector and we remain confident that the existence of our Code and the adherence to it will stand our members in good stead during the introduction of the new regulatory regime.

 

R F Watson

Chairman

January 2014

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 5 November 2008.

The Code is intended to cover key areas of concern to the consumer, who at the time of approaching such an organisation as a debt manager 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 information on cancellation rights
  • Fair, clear and transparent terms and conditions
  • Proper handling and disbursements of clients monies
  • Best advice and acting in the clients’ interests at all times
  • Fair and easy to access complaints procedures with the availability of an independent redress procedure in addition to, but not excluding the Financial Ombudsman Scheme.

 

The Code is intended to be a dynamic document, and has been subject to changes and amendments in order to incorporate and take account of changes in legislation and guidance and changing market conditions and activities. Currently the Code is being reviewed and assessed against the Money Advice Service Quality Framework for Organisations.

Following the closure of the Office of Fair Trading Consumer Codes Approval Scheme the Code was accepted, with effect from 1 April 2013 into the Trading Standards Institute Consumer Codes Approval Scheme.

 

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 TSI logos on all marketing and promotional material and websites.

Within, and outside the debt management sector DEMSA continues to promote the existence and value of the Code and TSI approval.

 

 

DEMSA AND THE DEBT MANAGEMENT MARKET

 

With the current membership of 22 DEMSA incorporates approximately 80% of the fee charging debt management sector.

 

Total number of plans

272,134

Total amount of debts managed

£4,800,376,767

Total amount of annual repayments made

£378,391,171

Total number of new plans taken on during year

56,975

Average amount of unsecured debt per client

£17,639

 

Taking into account the remainder of the fee-charging sector and including the free to client sector we estimate the size of the current market overall at:

Total number of plans

740,000

Total amount of debts managed

£12,380,000,000

Total amount of annual repayments made

£980,000,000

Total number of new plans taken on during year

194,000

Average amount of unsecured debt per client

£16,500

 

In addition to Debt Management Plans DEMSA members, and other debt managers including the free to client sector will advise on other solutions, including Individual Voluntary Arrangements (IVA’s), Debt Relief Orders (DRO’s),Bankruptcy, Protected Trust Deeds and Debt Arrangement Schemes (Scotland).

DEMSA members always aim to give the best advice possible in dealing with their clients and to this end will also look at all areas where income maximisation and cost reduction may be possible within a clients budget. PPI issues will also be examined.

 

 

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, and DEMSA, in maintaining standards is assessed by:

 

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

Web Sweeps and Desk Top Analysis

Members’ websites are swept on a regular, minimum quarterly basis. And in addition checks are made on all advertising material, social media, sms messages, adwords etc to ensure that the marketing of debt management plans and other financial solutions provided by members of DEMSA is closely monitored to ensure that consumers are not being misled and are provided with transparent, clear and truthful information regarding these products and services. In addition the DEMSA Code requires that members ensure that all business acquired through third parties and introducers is properly and compliantly conducted at the point of sale.

 

Customer Satisfaction Surveys

Customer Satisfaction Monitoring has been continued during the year by means of the well established Customer Satisfaction Survey. Surveys are issued by members with response coming directly to DEMSA and 10% of the members customer base will be surveyed during any one year.

The survey asks the consumer to give their views and experience 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 is used which is 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.

2010

2011

2012

2013

CSS Surveys Issued

7162

9710

18442

19571

Responses Received

1326

1819

2439

1537

Responses %age

19

19

14

8

 

Details of Ratings achieved under weighted scoring system

2010

2011

2012

2013

Excellent

704

53

944

52

1353

55

865

56

Good

284

21

350

19

417

17

289

19

Satisfactory

162

12

246

14

328

13

167

11

Below Satisfactory

63

5

117

6

153

6

93

6

Poor

113

9

162

9

188

8

123

8

Totals

1326

1819

2439

1537

In 2013 86% of all respondents awarded a weighted score of satisfactory or better, which is slightly up from 85% the previous year.

However in the actual questions asked of respondents only 2.0% of all respondents (2012 – 1.7%) gave a rating of poor when answering the questionnaire.

 

Compliance Audits

All members are subjected to a full compliance audit on an annual basis and any new members joining are fully audited before being accepted. The audit also incorporates and takes account of other monitoring measures including results from customer satisfaction surveys, mystery shopping and call monitoring.

During 2013 all audits were conducted on behalf of DEMSA by the Institute of Chartered Accountants in England and Wales (ICAEW). ICAEW is a world leader of the accountancy and finance profession with over 140,000 members worldwide and is a recognised supervisory body for audit, insolvency and designated professional bodies. In addition, during 2013 members were subjected to a separate audit undertaken by the ICAEW for entry into the Debt Management Plan Protocol.

The audit covers 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’s

 

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

Mystery Shopping/Call Monitoring

 

All members are subject to an independent mystery shopping exercise, and also are required to provide DEMSA with recorded calls for monitoring purposes. These calls are selected by DEMSA on specific dates and times and are sampled during the year. The purpose of the exercise is to monitor the interface between debt managers and their clients, particularly at the point of sale, 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:

  • Understanding of Debt Management Programme
  • Adequacy of Information Provided
  • Costs and Estimates
  • High Pressure Selling
  • Cancellation and Withdrawal Rights
  • Awareness of DEMSA and the Code of Conduct
  • Provision of IVA’s.

Individual calls covering the selling of a debt management plan can last a long time, up to 90 minutes in some cases.

 

COMPLAINTS HANDLING

Complaints Handled by DEMSA

DEMSA has a laid down complaints procedure to which all members subscribe. This does not preclude the consumer from utilising the Financial Ombudsman Service scheme and is additional, rather than instead of this scheme. All members’ complaints policies are in accordance with the guidelines provide by the Financial Ombudsman.

114 complaints were received and dealt with by DEMSA during 2013, which is a decrease from 152 in 2012.

As a proportion of the total number of plans held by DEMSA members (272,000) this represents only a minimal percentage. (0.05%)

A summary of the complaints handled is set out below:

 

2010

2011

2012

2013

Number of Complaints

44

116

152

114

Service Issues

17

77

118

66

Formulation of Plan

8

14

6

12

Ending of Plan

8

5

15

36

Adequacy of Information

11

20

13

0

Refunds Made (£)

8557

7709

18215

3806

Ex Gratia Payments Made(£)

2917

1500

9985

575

 

Of the 114 complaints handled 88 (77%) were in respect of Debt Management Plans with 26 (23%) relating to Individual Voluntary Arrangements. 45 of the complaints were considered justified and 69 considered not justified.

112 complaints were resolved following the intervention of DEMSA with a further 2 which were not able to be resolved deciding to take the option of further referral to the Financial Ombudsman.

All DEMSA members are covered by the FOS scheme and during the year 160 referrals were made directly to the scheme. Of these 22 were upheld by the FOS scheme and in total an amount of £23,879 was paid by way of compensation.

 

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 under the Chairmanship of Sir Harry Ognall, retired High Court Judge, and the procedures are reviewed and revised as necessary.

The Panel is convened on notice of a potential breach of the Code, which may come from any of the following sources:

  • A consumer complaint
  • As a result of a Compliance Audit
  • 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.
  • A complaint from another member
  • A complaint from another source, including lenders and other consumer bodies.

 

During 2013 the Panel was convened on one occasion to consider a disciplinary issue relating to a member

After a full investigation the member was censured regarding the issue.