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Grant Thornton produces Independent Study into Fee Charging Debt Management Market

Posted on November 6, 2012

A leading accountancy firm, Grant Thornton, recently undertook a major assessment of the professional debt management market. DEMSA, the principal trade body in the sector, commissioned the report to provide consumers with a clear and evidence-based picture of the sector. The report examines the structure of the market and the customer journey through a debt management plan.

Using primary and secondary research Grant Thornton uncovered a number of significant findings on the sector, including:

Consumer benefits

  • Throughout the lifecycle of an average debt management plan, professional debt management companies effectively help consumers reduce the initial balance of their debt by 30-35%. This benefit stems primarily from when a professional debt adviser freezes or lowers the interest rate on their clients’ debt
  • The report also identified how debt advisers offer a range of practical solutions to help their clients regain control of their finances. For example, professional debt advisers help their clients increase their disposable income through getting the best deal on utility rates

Market structure

  • At the end of 2011, DEMSA members had 220,000 Debt Management Plans (DMPs) under their management, accounting for a 34-42% overall share of the market
  • It takes DEMSA members on average 6 hours to set up a DMP at an average cost of £208
  • Just 17% of DEMSA members’ annual revenue is sourced from set-up fees, highlighting debt management companies’ interest in the long term sustainability of DMPs
  • Just under 1 in 4 consumers that sought advice from a DEMSA member entered into a DMP

Creditor experience

  • Creditors recognised that there is a place for both free to consumer and professional companies in debt advice
  • Creditors reported that DEMSA members are seen as amongst the best in the market and make real efforts to ensure compliance with industry standards and to drive best practice
  • Creditors recognised a number of benefits of using a debt management company including; ability to engage with customers, ability to act as an independent party to liaise and address the consumers’ debt issues with different creditors at one time

Commenting on the report, Michael Land, Chairman of DEMSA said: “This report provides an impartial and credible assessment of the professional debt advice market and the consumer journey through a debt management plan. One of the clear findings of the report is that the professional debt advice market makes a tangible improvement to a customer’s ability to deal with their debt. On average professional debt advisers are able to help consumers reduce the initial balance of their debt by 30-35%.

“A consumer who goes to a member of DEMSA can expect a range of practical solutions to help them regain control of their finances. Members of DEMSA invest heavily to ensure that the quality of advice their clients receive is consistently high. It is for that reason that DEMSA launched a professional qualification in partnership with the Institute of Money Advisers. I am pleased that the consumer benefits of this expert advice have been recognised in this report.

“Thus far there has been little independent and credible assessment of the professional debt management market. This lack of evidence has given rise to some misunderstanding, I hope this report will help to produce a more balanced view.”

Please click here to view the full report.

For further queries please contact:
Melanie Taylor, Director of External Relations at the Debt Managers Standards Association – 0113 277 7610
Chris Bose, Lansons Communications – 020 7294 3619