ClearDebt’s involvement with the collapse of Apex DCM has been explained in detail elsewhere on this blog and already featured in BBC news coverage. Other BBC regional programs (X-Ray BBC Wales) have also featured the DCM Money case with strong testimony from some of those most affected by the demise of the debt management company.

Such stories inevitably revive the sentiment repeated in the program featured:

….absolutely do not pay for debt management services because there are loads of organisations out there who’ll provide exactly the same service as these companies but they will do it completely free of charge. -Rachel Treadaway Williams, BBC

Yes there are creditor funded organisations that provide debt advice that is free at the point of need. Free debt advisory services that are taxpayer-funded, charitable or creditor-funded include Citizens Advice, National Debtline and the Consumer Credit Counselling Service (CCCS). They provide a valuable service to UK citizens suffering financial difficulties.

But do they provide exactly the same service as commercial organisations as claimed?

Let’s look at five aspects of service that are of importance to people in debt.

Capacity

CCCS’s latest annual review (2009, page 5) reveals that they offer advice at the time of the first call to 25% of callers – fee-paid adviser generally offer this call (free – and it is of roughly 40 minutes duration) to 100% of callers.

Availability

Fee chargers tend to be available (on the telephone, admittedly) for longer hours and on more days than non-fee chargers. This applies, often to the administration and support process as well as to the initial advice. Payplan, I think, offers the longest hours and is broadly comparable to a fee charging company. Did we mention you can query a qualified debt advisor round the clock online also by chat, question or via text message?

Informational advice

When is advice no more than information? Debt management companies financially administer payments to creditors whereas plans offered via Citizens Advice often do not. Employees and advisors of ClearDebt undertake over 200 hours of study to gain industry wide accepted qualifications (including CertDR – certificate in debt resolution and the CPI from the Insolvency Practitioners Association)  to advise people in debt. You gain the benefits of that knowledge with zero upfront fees.

Competitiveness

An IVA can offer a number of benefits over a Debt Management Plan, and typically last 5 years which is less than half the typical debt management plan even offered by those recommended by CCCS, Payplan or Citizen’s Advice (and, to be fair, most fee-charging debt management companies).

Value

A ClearDebt IVA is available to people with unsecured debts as low as £10,000 and sometimes less..  In contrast this threshold is £15,000 from creditor funded organisations. CCCS average debt for people in IVAs is £58,847 – this seems to indicate that they don’t advise (or are unable to pass) IVAs for lower debt individuals, even though this will often be in the debtors’ best interests.

By contrast, ClearDebt’s average IVA debt level in 2010 was £32,224. It is worth repeating that wherever it is possible, an IVA is almost always a better solution for a debtor than a DMP. IVAs freeze interest and charges automatically, write off debt (typically 50%) at the end of the arrangement and stop creditor action.

Regardless which type of organisation an individual assigns to arrange an IVA, a licensed insolvency practitioner, will be reimbursed for professional services ultimately from the debtors contribution. ClearDebt employ licensed insolvency practitioners and are not merely a commission middlemen organisation.

ClearDebt also operates so-called “protocol compliant” IVAs which is a sort of industry standard meaning you won’t find lower fees elsewhere – even amongst charitable providers. ClearDebt do applaud the actions of the media to expose unscrupulous operators in the debt sector, have a track record of leading action against rogue operators spanning many years and will continue efforts on this front, unafraid to set the record straight where necessary.

Furthermore ClearDebt as a founding member of the Debt Resolution Forum continually lobbies for raising professional standards across the industry.

Heads you win, tails I lose

Where the media sometimes come up short is recognising the differences between services levels and a misguided pursuit of simplifying the argument for a sound byte.

And yes, like other professions the debt industry comprises mixed levels of service and standards by practitioners and organisations alike.

Look further afield and ask yourself if broadcasters can be equally compared? Are newspaper journalists all the same? Is free legal aid better than paid legal advice?

Or is that really the wrong question? In spite of the welcome forthcoming reforms in the debt industry for non OFT Guidance compliant firms to be weeded out, commercial and creditor funded debt organisations will continue to service the needs of people in debt in the UK and unlike the headline of this blog post there really are two sides to every coin of the insolvency profession.

What do you think?

Increasingly kitemarks are being used by companies in their communications materials to signify importance and trust to consumers.

Kitemarks, or logos from third parties are ever more evident these days, and I’m not just referring to the financial sector. Perhaps the most outstanding example of third party logos are flat screen TVs which manage to plaster ever more combinations of the weird and wonderful stickers of high tech features that your 42″ plasma is capable of.

In the consumer finance sector, third party logos and kitemarks are also seeming to trend. This week saw the launch of a new kitemark in the high street banking sector.

Vote in the poll and leave your views below in the comments. If you voted Depends, do explain your thoughts below in the comments section.

Judging by reaction on Twitter from seasoned finance journalists it would seem newly launched kitemarks in the consumer finance sector are coming under scrutiny.

The above is just extracts from various healthy jousting on Twitter, we’re sure the debate will continue, to that end you may be able to follow and add to conversations using the Twitter search of the term kitemarks or better still hashtag your conversation #kitemarks.

So how does ClearDebt use kitemarks?

ClearDebt uses third party logos on its webpage. One of these logos is to denote membership of an important debt industry regulatory body that maintains professional standards and offers extensive certified programme of training qualifications, the first of its kind in the UK, for individual debt advisors. We think this is important.

The other logo is of a independent third party website to ClearDebt that publishes regular feedback and ratings of companies in the sector. We understand it’s not just what we say about ClearDebt that matters to people, we welcome others to be the judge of ClearDebt in an open manner.

What do you think about kitemarks in financial services?

Share your thoughts in the comments.

ClearDebt learned today that debt advice company “DebtDR” – the trading name of Hermes Financial Solutions has ceased trading.

Free Debt Management Plans available to DebtDr clients

ClearDebt is offering any current DebtDr client the same opportunity that has been taken up by hundreds of Apex DCM clients – namely a free assessment of their circumstances and free advice on all the options open to them. Where a DebtDr client chooses a debt management plan (DMP) this will be free of all charges, as long as the plan continues to run. If an Individual Voluntary Arrangement (IVA) is recommended and the client chooses this option then only industry standard (or “protocol compliant” fees will be charged).

DebtDr creditor details unavailable

We won’t be able to help DebtDr clients establish creditor details and sums outstanding (as we have with Apex) because we don’t have access to the client database.

DebtDR apparently had a trading model similar to failed debt company Apex DCM, offering clients “full and final” settlements. It appears the company had amassed considerable losses. The firm appears to have offered its products through a network of Independent Financial Advisors (IFAs), some of whom were concerned enough to suggest that clients should ask for their money back – unsuccessfully.

We’ve been dealing with former DCM Money debt management clients for more than a month now – and now the urgent calls from individuals have calmed down ( a bit) we’ve taken a look at the database to see what we could learn about the business Apex DCM was running (until it went into administration on March 2, that is).

Apex DCM trading as DCM Money Solutions

What follows has to be taken with a huge pinch of salt: First of all, the data we have relates to 1,036 customers who either had a current DMP with Apex DCM or who had stopped paying into their plan sometime prior to the company going under.

We know that around 500 clients did complete their plan with Apex, so the figures here all relate to the plans where clients were still paying in or where clients had already stopped making payments – presumably because they felt they weren’t working for them.

We know that some clients had been paying into their plan for years – and that some people’s DMPs had run for only months – so it’s very difficult to make more than very general conclusions.

DCM Money Solutions reduced debt by 3%

First, our database shows that, when they initially approached Apex DCM, the 1,036 clients for whom we have details owed their unsecured creditors a total of  £31,897,427.

The total of latest confirmed balances (which might have been after some time in a plan – or just after Apex had confirmed initial balanced with creditors) was £30,925,079.

So, for these debtors, Apex DCM had reduced balances – often after years of payments, sometimes after only a short while, by only £972,348.

That’s 3% of initial balances. We would expect to see that a significant majority of the individual debts would have decreased in value.

OK, when clients first go into a fee-charging debt management plan it is likely that – for a few months – the total debts will continue to rise.

However, over an entire book of debts, sometimes including plans that have been going for years, we would expect to see that a significant majority of the individual debts would have decreased in value.

In fact, in the case of the Apex DCM book, 57% had either increased or stayed the same. 18% had gone up.

The balances that had risen had gone up by, on average, 12% – the balances that had fallen had gone down by just over six per cent.

DCM Money clients have larger than average debt

On average, Apex DCM clients owed £30,789 in unsecured debts when they entered their plan. Here at ClearDebt, the DMPs run by our debt management company, Abacus, have average initial balances of around  £24,000 – so Apex DCM clients had higher debts, which usually means they probably have higher incomes than they average too – a fact borne out by the average monthly payment into their plan of  £231 (our average is £190) :

Apex were taking 10% as their monthly fee – so the average clients had funds available for distribution, monthly, of £208. In fact, Apex were sending, on average, £127 to creditors and retaining £81, every month, for the fund to provide for full and final settlements.

So, by rights, Apex DCM should have been putting away, for their clients,  around £75,000 per month. That’s something we are sure the administrators will be looking into.

Average debt repayment:  20 years

For us, what seems quite telling is the time it looks likely it would take Apex DCM to repay their clients debts. The average Apex DCM client, assuming all interest and charges were frozen would see their debts repaid in just over 20 years (but we can’t say what effect, if any, negotiating full and final settlements would have had on this).

Using the free debt management plan ClearDebt have offered Apex DCM clients, they will be debt-free, on average, after just over 11 years. However, a very high proportion of Apex DCM clients (roughly a third of the ones we’ve spoken to) are suitable  for Individual Voluntary Arrangements (IVAs): most of those will be debt-free (if they make all the payments) after 5 years.

If you have been affected by the collapse of DCM Money, you can share your experiences and discuss your case with a qualified advisor on a special community thread here: ClearDebt reveals debt data from Apex and DCM Money client database.

We are pleased to announce that as of today, Monday 11 April 2011, we are in a position to provide all former clients of DCM Money Solutions and Apex with all the details we have concerning their outstanding balances and creditor identities, so, if they wish, they can negotiate their own solution with their creditors.

Unfortunately, the details we have been given are of variable quality but, in most cases, we have enough data to identify a client securely when they ring us – plus details of:

• the last balance on each creditor account,
• the monthly payment that was supposed to have been made and…
• the creditor identities and account numbers.

In some cases the creditors may be different to those that a client expects to see, because the original creditor has sold the debt, and in other cases, sadly, the creditor information will be out of date because a debt sale took place and has not been recorded by Apex DCM. But all we can provide, we will.

We will continue to post further details on this and any other developments on the main blog on this topic.

Former Apex and DCM clients can get in touch by calling dedicated freephone number 0800 612 3318 or emailing apexenquiries@cleardebt.co.uk.

Unfortunately, we can’t continue an Apex DCM plan (nor would we want to) and cannot assist with any matters relating to the administration of Apex DCM. Clients who sent money to Apex DCM after 2 March 2011 should get this back from the administrators quite quickly – but that is also a matter for the administrators and not ClearDebt.