Last week the Insolvency Service released figures showing that debt relief orders are more prevalent among 25-34 year olds than any other age group.

These figures were released to launch a “Dealing with your debt” campaign by the Insolvency Service which “aims to help the young deal with their debt in the most appropriate and effective way”.
The campaign gained a lot of publicity, being featured on BBC News programmes across the country as well as regional radio stations. BBC used a case study to illustrate the issue, which you can view below:

I’m all for raising awareness about personal debt and the solutions available, but sadly from some of the comments I saw on twitter about this story, people were focusing on the notion that a debt relief order is an “easy” way to write off irresponsible spending, rather than looking at the real reasons why more and more young people are struggling with debt.

Here are some of the comments left on twitter:

I’m no expert on debt relief orders, however I have studied them as part of the training towards my CertDR qualification and one thing which stands out to me is the strict criteria required in order to apply for a one, including:

• Your total assets must not be more than £300.
• Your disposable income after deducting all normal living expenses, must not be more than £50 per month.

From my experiences here at ClearDebt, the reason most people find themselves in debt is because of a change in circumstances. They took on credit when they were in a secure position to pay it back, but then a job loss, an illness, a divorce, a pregnancy or some other life-changing event affected their ability to make the repayments.
There are of course some people who are in debt due to poor money management and a “buy now, pay later” attitude, but these are a minority and I don’t believe that any debt solution should be considered an “easy” option.

The Office of Fair Trading released their new debt management guidance in June this year and debt management companies were invited to take part in a consultation process. One aspect of this guidance was the use of social media by debt management companies. It appeared that fee-charging debt management companies might be banned, by the OFT, from using Facebook, Twitter and, possibly, Google Adwords.

ClearDebt’s Andrew Smith has been quite outspoken on his disagreement with the idea that debt management companies could be banned from using social media and was quoted in the Telegraph last month saying:

What they are looking at are today’s methods of mass marketing, and they are not giving us the opportunity to compete. Also, they are limiting one of the best ways of exposing the cowboys. When cowboys turn up in our industry one of the best ways of exposing their lack of knowledge or experience is by debating with them on social media.

Here are some of the other reactions to this, as expressed through the social media channel Twitter, you can view the OFT’s response at the end of this blog post.

The deadline for submitting responses to the new debt management guidance was 5th September. You can read ClearDebt’s response here.
You can also follow Andrew Smith on Twitter @andrew_f_smith.

Since we wrote this article, the OFT have told us that there is no intention to ban debt resolution companies from using social networking, but that companies will have to be careful that statements they make will be clear and truthful. This seems right and fair, but we look forward to seeing the OFT’s detailed guidance on the issue – and will continue to watch the story, and comment, until then.

The OFT (Office of Fair Trading) announced revised set of guidelines for debt management companies today.

Andrew Smith, marketing director of ClearDebt and spokesperson for the Debt Resolution Forum discussed the guidelines with BBC Radio.

Hear excerpts of the BBC interviews below.

Reproduced under licence from BBC Radio – © 2011 BBC. The full Radio programmes are available for a limited time from the BBC.

• Radio 4, Today
• Radio 5, Wake Up To Money

I was really pleased, if not a little terrified, to have an opportunity to tell our part of the DCM Apex story to the BBC, though I’m really angry that, yet again, one of the bad boys in the debt resolution industry is going to further damage the reputation of us all.

A large number of companies, members of the trade associations like Debt Resolution Forum, are working incredibly hard to deliver an industry with standards and training, which consumers can trust. Then along comes a company like DCM Apex that shatters all that good work.

Promoting standards within the debt industry

Companies like ClearDebt really welcome the tightening of standards that will come with new OFT guidelines, to be launched shortly. We want to be trusted because we know the consumer debt problem isn’t going to go away and we want to show that we can deliver a genuinely helpful service that people are happy to pay for.

Companies like DCM Apex – and others that are still in the marketplace, taking people’s money – damage all of that.

I believe it’s simple – in a debt management plan the company works, right at the beginning, to work out what you can afford to pay, negotiates with your creditors to reduce interest and charges as far as possible and then hands over every payment you make (less their initial and monthly fees) to your creditors within five days. If that isn’t what they are doing, then ask questions – especially regarding the way they handle your money: If large quantites of your dosh stay in their account for any length of time you have to ask yourself if you can trust them. Well, do you?

ClearDebt’s role in the DCM Apex story

There’s been a lot of confusion about ClearDebt’s role in the DCM Apex affair. We did not buy the company, the assets or the plans – we just bought the database of client contacts – and we have been offering clients free debt management plans and Individual Voluntary Arrangements with industry standard (protocol compliant) fees – or just to give clients access to the data DCM Apex held on them.

No – we’ve not been doing this out of the goodness of our heart – though one of the reasons why our Chief Exec, David Mond, decided to buy the database was because he thought a lousy job had been done and that something needed to be put right, for the sake of the industry’s reputation. So, ClearDebt through its sister company Abacus have offered entirely free debt management plans to those for whom it is the right advice and where appropriate. The fees we get (which are no higher than any other provider would charge) for IVAs is where we make this a reasonable investment for us.

It’s an amazing, scary, experience having a TV camera thrust up your nose and getting asked some tough questions – but i was glad to do it, if it shows people out there that there are some debt resolution companies that want to do the job right – and do.

Anybody who has been following the thread about DCM Money and Apex on consumer site MoneySavingExpert will notice that ClearDebt have been mentioned a few times in both a positive and a negative light.

Recently, ClearDebt’s Andrew Smith signed up to the forum to respond to some of the questions and to offer advice to those who needed it. Sadly, the forum moderators at MoneySavingExpert removed his posts without any notification or providing a reason why.

ClearDebt’s Andrew Smith, posted under the username of “rednelly” and although his posts have now been removed from the site, thanks to google’s cache of the website we managed to take these screengrabs of Andrew’s responses. You can click on the images to enlarge them in order to read the text and we have also re-posted his comments here as people who have been affected by Apex and DCM Money may find them useful.

Possible Outcomes for DCM Money and Apex clients

Andrew’s first response was made to a poster who was unsure about completing the forms sent to her from the Apex and DCM Money Administrators. This is what he wrote:

First, Creditors may vote at the meeting only if they have submitted a claim to the administrator before the meeting, together with, if necessary, a proxy. So, if you return the claim form with proofs of debt you get a vote – the power of your vote is proportional to the value of your proved debt. In other words, if there are creditors votig who are owed a total of £100,000 and you are owed £10,00, then your vote is worth 10% of the total. A simple majority by value of those present and voting in person or by proxy is required for the approval of the administrator’s proposals.

Now, the resolutions:

Resolution 1 – Once the administrators have fulfilled their responsibilities (in this case they have said that the objective of the administration is to get better result for creditors than would be obtained through an immediate winding up: they aren’t expecting to be able to distribute any money, so this probably only relates to statutory duties to report directors conduct, etc) they need to decently bury the company – this resolution gives them the power to do that by having the company dissolved or applying to the court for a compulsory liquidation. In this case the Official Reciever will usually become the liquidator.

Resolution 2 relates to another form of burial of what’s left – in this case a creditors voluntary liquidation, with the current joint administrators becoming the liquidators. In a CVL I believe there has to be a crediors meeting, and the directors have to tip up and answer creditors questions. Could be quite exciting.

Resolution 3: This allows the administrator to fix his own remuneration on the basis of time properly spent (he and his staff have to keep records and they get monitored on this point by their recognised professional body) if a creditors committee isn’t voted in to assist the administrator.

Resolution 4: The administrator incurs postage costs in communicating with creditors. This allows that expense to be claimed back (but at cost only – they can’t make a profit on it).

Resolution 5: There’s 25 grand (about £24 for each ex-client) left in the company. The administrator is asking for you to vote in favour in order that he can pay his fees from that.

Resolution 6: The administrators are asking to be discharged from any liability for errors that might have been made, once hey cease to act as administrators. I think if they do something dreadful they can still be hauled up before the beak – but this protects them from being attacked legally from small errors, which sometimes occur and – lets face it – in this case there might be a lot of room for unintentional error, which wouldn’t be their fault.

There’s always a tendency to have a moan at the insolvency practitioner – they are often the only ones who seem to benefit from a case like this: But they do have statutory duties to carry out and there would be much more chaos otherwise.

Could ClearDebt honour the contracts given to Apex and DCM Money clients?

Another of Andrew’s posts was a response to a poster going by the name “NeutralObserver” who, amongst other things, made the suggestion that ClearDebt should honour the original contracts given to Apex and DCM Money clients. This was our response:

I am a ClearDebt employee. There is a lot wrong in the above. First, we did not purchase the book. We purchased the clients details only and we did this after the collapse – not before.

And, the amount that appears to be missing seems to be considerably more than our annual profit. But, even if we could afford a bail out, why would it be fair for us to do so? We have had absolutely nothing to do with this failure.

ClearDebt has absolutely nothing to do with tthe events that have led to DCM clients being in the position they are now in. We are doing our best to help sort out their futures. Those who choose our free debt management plan will, in perpetuity, have every penny paid to their creditors. And, yes, we are providing IVAs to those who will save by doing so – and we are charging industry standard (protocol compliant) fees for doing so. I don’t believe we are adding to the misery DCM’s failure has caused and to make us in any way responsible for it is ludicrous.

In our opinion, all we were trying to do on MoneySavingExpert’s forum was to try to help people and to keep the record straight. If you have a question for ClearDebt about Apex and DCM, you can do so at our Apex DCM discussion on the ClearDebt Community