Debt Management Plan Provider Costs
Debt management plans can either be set up by the person in need of one or they can be set up by an external provider on their behalf. Debt management plan providers will charge you what is normally a monthly fee. The amount charged should be agreed upon from the outset of your arrangement.
Although the exact size of the fees charged by each provider will vary slightly from company to company, there are some general trends that you can expect to see.
How much should I be paying my debt management plan provider?
There are no specific regulations on exactly how much a plan provider is permitted to charge you. The only regulation that affects them, with regards to fees, is that they must be transparent and open with you about how much you will be required to pay. This rule was set out by the Financial Conduct Authority and states that a company must be clear about how much they are going to charge you.
In addition to this, a minimum of half of the amount that you pay each month to your debt management plan must go to your lenders. This means that your debt management plan provider can only take half of your monthly payment and that decreases after the first six months. Your provider is also expected to divide the costs of your plan evenly over the duration of the term, this means splitting your fees into balanced monthly payments.
Am I Being Charged Too Much?
There is no black and white answer to whether or not you are paying more than you should be. All debt management providers are different and of course some are cheaper than others, to find out whether you could be paying less the best thing you can do is compare the various deals that are out there. This will allow you to make an informed decision when choosing your debt management plan and will prevent you from paying more than you need to.
Another question that is worth asking is whether or not you are being charged fairly by your debt management plan provider. The main way to determine this is by checking the terms and conditions of your debt management plan. Once you have looked at these you will be able to determine whether or not your debt management plan provider has done any of the following:
- Put more than half of your monthly payments towards paying their own fees.
- Been unclear or misleading about the amount that you would be required to pay each month, before you signed up to the plan.
- Failed to inform you of the fact that you would be paying monthly fees at all.
- Failed to set out the entirety of the amount that you would pay over the course of the plan and how long the term of the plan would be.
- Failed to give you a breakdown of the specific fees that you would pay each month.
The Financial Conduct Authority has strict regulations in place that state that your supplier must be completely clear with you about all of the above information. If you believe that you provider has not been completely clear with you, you should make a formal complaint against the company that you have taken out the plan with.
What to do if you've been charged unfair fees
If, after reading the above information, you consider yourself to be the victim of unfair fees on your debt management plan, then there are a few different things that you can do about it.
The first thing that you should do is make an internal complaint to your plan provider. Once you have done this your provider is legally bound to respond to you within a prompt and professional way.
The next thing that you can do if you still feel like the issue has not been resolved is make an external complaint to the Financial Services Ombudsman. This should only be carried out after your provider has failed to deal with your internal complaint. The Ombudsman service are an external body that are in place in order to mediate between you and your provider. If they believe that you have a case, they will compel the provider to provide you with a solution.
The last thing that you can do, if you are still unhappy with the amount that you are being charged by your debt management plan provider, is switch to a different firm that offers lower and fairer charges. One thing that you should be aware of is the fact that you may incur early cancellation charges from your existing provider. It is worth seeing how much these are in advance of cancelling so that you can budget correctly.
I can't afford my debt management plan, what can I do?
If you are not being charged unfairly by your debt management plan provider but you still believe that you are spending too much to be making it worthwhile, you should consider taking some other measures to reduce your debt. Debt management plans can work but they are not for everyone, if you want to cancel, you are within your rights to do so as long as you inform your provider and creditors of this.