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Annual Report 2014

Posted on October 29, 2015







2014 has proved to be a very eventful year for Debt Management Companies with, in particular, the change in the regulator for the sector having a substantial impact on firm’s activities.

The Financial Conduct Authority (FCA) took over the responsibility for the regulation of Consumer Credit on 1 April 2014, which had previously been the remit of the now defunct Office of Fair Trading (OFT).

The FCA has incorporated the former OFT guidelines for Debt Management into their rules, along with other specific rules on areas such as client money handling and firms now have to abide by the FCA Rule Book, Consumer Credit Sourcebook and CASS Rules. Further Prudential Requirements will be phased in over the next two years.

Firms in the debt management sector were granted interim FCA permission with them having to apply for full permission. As a result of this regulatory change activity in the commercial debt management market has slowed as firms have been concentrating on getting their applications for full permission submitted before what was for the majority of businesses the deadline date of 31 December 2014.

There have been a number of firms who have decided to exit the sector, principally because of the increased level of regulation and this has caused a consolidation within the market with some firms substantially increasing their business by acquisition of these books.

We believe that, once the members of DEMSA have gained the appropriate permission they will continue to provide a fair and efficient service to their clients. Recent evidence published suggests that there will be an increasing demand for debt advice and debt solutions in the immediate future and DEMSA members will be ready to offer this service where appropriate.

R Wharton


January 2015


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.

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.

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. With the implementation of the FCA regime the Code is being reviewed in order that, in future, it reflects the high standards of fairness in outcomes expected by the FCA.


With the current membership of 22 DEMSA incorporates approximately 70% of the fee charging debt management sector.

Total number of plans 223,727
Total amount of debts managed £3,776,198,726
Total amount of annual repayments made £343,956,719
Total number of new plans taken on during year 17,560
Average amount of unsecured debt per client £16,878

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 733,000
Total amount of debts managed £11,814,000,000
Total amount of annual repayments made £989,000,000
Total number of new plans taken on during year 127,000
Average amount of unsecured debt per client £16,100

During 2014 we consider that there has been a fall in the numbers of debt management plans operating due principally to plans being transferred to other options, eg. IVA’s. In addition a reduction in activity of Debt Management Companies has been seen whilst many firms have been concentrating on FCA authorisation

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 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.

2012 2013 2014
CSS Surveys Issued 18442 19571 19128
Responses Received 2439 1537 1502
Responses %age 14 8 8

Details of Ratings achieved under weighted scoring system

  2012 2013 2014
Excellent 1353 55 865 56 861 57
Good 417 17 289 19 294 20
Satisfactory 328 13 167 11 144 10
Below Satisfactory 153 6 93 6 62 4
Poor 188 8 123 8 141 9
Totals 2439 1537 1502

In 20134 87% of all respondents awarded a weighted score of satisfactory or better, which is slightly up from 86% the previous year.

However in the actual questions asked of respondents only 2.0% of all respondents (2013 – 2.0%) gave a rating of poor when answering the questionnaire.

Compliance Audits

All members have been subject 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 2014 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 2014 members were subjected to separate audits undertaken by the ICAEW for inclusion in 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 a review of 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 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 provided by the Financial Ombudsman.

96 complaints were received and dealt with by DEMSA during 2014 which is a decrease from 114 in 2012.

As a proportion of the total number of plans held by DEMSA members (223,000) this represents only a minimal percentage. (0.04%)

A summary of the complaints handled is set out below:

2011 2012 2013 2014
Number of Complaints 116 152 114 96
Service Issues 77 118 66 45
Formulation of Plan 14 6 12 5
Ending of Plan 5 15 36 21
Adequacy of Information 20 13 0 25
Refunds Made (£) 7709 18215 3806 5663
Ex Gratia Payments Made(£) 1500 9985 575 1996

Of the 96 complaints handled 72 (75%) were in respect of Debt Management Plans with 24 (25%)  relating to Individual Voluntary Arrangements. 51 of the complaints were considered justified and 45 considered not justified.

90 complaints were resolved following the intervention of DEMSA with a further 6 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 265 referrals were made directly to the scheme. Of these 82 were upheld by the FOS scheme and in total an amount of £29,622 was paid by way of compensation.


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.