TDX Group, the leading provider of analytics-based debt management solutions, has launched a new service aimed at improving processes within the debt management industry. The launch of The Debt Management Exchange (DMX) comes after the company’s review of the industry found current practices needed to be improved. Issues such as a lack of consistency within the industry as a whole increased the chances of customers receiving the wrong advice or entering into a Debt Management Plan (DMP) that either failed to match their individual circumstances or gain the support of their creditors.
Currently the average DMP is set up to repay the outstanding debt within 12 years but TDX Group estimates that one-four DMPs fails in year one and more than 45% fail in the first five years.
According to TDX Group data, DMPs account for approximately £10 billion of personal debt and a further £5 billion is set to be added this year as refinance and remortgage options continue to dwindle. The debt management expert believes that the industry is suffering from end-end processes that are both inefficient and difficult to administer for all parties. The lack of a consistent process leads DMP providers to operate very differently whilst creditors also differ in their treatment and support of customers taking out a DMP. With TDX Group’s data showing that 90% of debtors fail to shop around for a debt solution, this means many customers could end up with an inappropriate solution.
Given that TDX Group forecasts DMPs are set to continue to rise substantially in 2008, the company says that the situation needs urgent redress, particularly with regard to mitigating the current high failure rates, which are in no-one’s interest. Customers end up back at square one – or worse – and around 75% of them subsequently end up entering into a formal insolvency option of an IVA or bankruptcy.
DMX delivers a centralised platform that will automate the entire process of the exchange of information to support DMP proposals between creditors and DMP providers. DMX will benefit all parties as it ensures that DMP providers know the criteria required from creditors to support a DMP and are therefore able to offer appropriate advice to debtors based on their individual circumstances, while at the same time ensuring creditors get a fair return.
Following extensive consultation with stakeholders across the industry, DMX will deliver benefits in three key areas:
- Communications and automation: to drive greater efficiencies and speed up the process
- Customer insight: to ensure greater consistency of DMP proposals and improve transparency
- Industry relations: working on behalf of creditors with DMP providers to improve the industry’s external profile
CEO of TDX Group, Mark Onyett, comments: "The debt management industry has grown by around 650% over the past five years, and what we have at the minute is a disparate group of companies all playing to their own rules. The status quo doesn’t favour anybody and with demand for DMPs at an all-time high the problems will only get worse. The philosophy of DMX has been to develop common interest. We look forward to continue working with the industry to make these plans simpler to set up and reduce the associated administration effort for all concerned."
Sean Gardner, director of MoneyExpert.com said: "Debt is set to be the major issue in the financial services industry over the next year. Our own Debt Index shows around 38 per cent of people are concerned about their ability to manage their debts."
"TDX Group’s launch of DMX is a significant move as it will ensure people in debt receive appropriate advice while balancing the interests of creditors."
John Fairhurst, Managing Director at PayPlan, said. "A number of players in the debt management industry have tried to stand out by upholding their own set of consistent standards and codes of conduct. But we have now reached a stage where the industry as a whole needs to adhere to a set of common standards and practices that serve to protect the consumer and improve completion rates of DMPs."
Kevin Still, Director of EuroDebt Financial Services, added: "Consumers in serious financial difficulty, creditors and debt solution providers are all facing a huge challenge that requires a co-ordinated approach to provide a fair balance to both debtors and the lenders they have borrowed from. DMPs from both ‘not for profit’ and commercial players are likely to play a much more significant role where re-financing is not a viable alternative. We see the launch of DMX as a major stepping stone to improving consumer and industry confidence in a very sensitive sector."
TDX Group is already an expert in running debt management platforms. In 2006 the company launched TIX (The Insolvency Exchange) which now processes over 80% of all UK Individual Voluntary Arrangement (IVA) proposals on behalf of creditors. TIX analytically decides which proposals to accept, optimises the lifetime return and manages each IVA through the 5 year term of the arrangement.
Table one: DMP facts at a glance
Key DMP Facts
- Total stock cases 2002 50,000
- Total stock cases 2007 375,000
- New cases 2007 170,000
- New case predicted in 2008 400,000
- Average creditors per case 8
- Average term 12 years
- Average debt per case £36,000
Source: TDX Group data