Members must provide clients with sufficient, clearly written information to enable them to make an informed decision about whether or not they would benefit from the services the DMC’s offer.
In particular the following must be covered:
- It must be made clear that administration and/or management fees will be payable, and details of such costs must be provided.
- If a first payment goes to the DMC and not to the creditors, consumers must be warned that they will go further into arrears with their creditors.
- The consumer must be advised that he will be given the opportunity to withdraw from the contract, the procedures for withdrawal from a debt management programme, and the circumstances in which costs will and will not be incurred and, if they are, what they are likely to be.
- The nature of the service to be provided by the Member: the total cost to the consumer of the service including any initial or fixed charge fee or deposit, the periodic management fee to be paid to the member multiplied by the estimated length of the contract; the amount to be repaid; and the likely duration of the contract. Where it is not possible to establish the cost or duration of a contract a best estimate of the total cost to the consumer of the service must be given. Estimates must be realistic and must be accompanied by a clear warning that it is an estimate and the assumptions it is based on.
- If the proposal is covered by the Financial Services(Distant Marketing) Regulations 2004 then the relevant information prescribed by that act, including cancellation rights must be advised to the consumer.
- Creditors are not obliged to accept reduced payments or to freeze interest and/or charges and fees and that, unless they do so, repaying the same debt over a longer period of time will increase the total amount to be repaid.
- Collection actions, including default notices and litigation, can ensue and that there is no guarantee that any existing or threatened proceedings will be suspended or withdrawn.
- The likely impact of the debt management programme on the consumer‚Äôs credit rating, that they might not be able to obtain credit in the short term, and that there is some likelihood that they will not be able to do so in the medium to long term.
- The importance of prioritising debts such as mortgage, rent, council tax and utility payments and any arrears, and ensuring that an appropriate allowance is made for these payments within any debt management programme.
- The nature of those commitments that will, and those that will not be included within the repayment plan must be made clear to potential clients.
- The likelihood that existing bankers may not wish to continue banking facilities and information and advice on basic bank accounts.
- The terms and conditions of any managed or other bank account or other service offered.
- Where a member of staff from a Debt Management Company recommends that, in the consumer‚Äôs best interests, one of their options is a remortgage, or further advance, or consolidation loan, the DMC must disclose to the customer in writing the level of fee, commission or any other remuneration they will receive from the third party who arranges this service, if not already disclosed by the third party. Any such advice will be given with the requisite degree of care and if it is in the consumer‚Äôs best interests (notwithstanding that the consumer does not take up a debt management programme with the member and does not therefore become a client).