Promise warns brokers offering debt solutions
Steve Walker, group managing director said, “I don’t want to tar all companies in the sector with the same brush but it is vital that brokers do a little research before selecting a partner to refer their clients to. We are being passed cases by brokers where other companies have been involved earlier and have over-charged, not delivered a service, caused clients huge problems and wrecked the client relationship for the broker.”
Walker added “There are a number of scenarios which brokers need to be aware of. Firstly, it is normal to charge 1.5 to 2 months of the clients disposable income as an initial fee. However, some debt management companies are charging between the first 3 and 6 months’ disposable income which does little to help the consumer or their creditors.
“Secondly we have seen a number of cases where the client’s disposable income has been miscalculated and over stated by as much as double. Consequently, clients often can’t afford the plan, will default on the new arrangement with creditors whilst the debt management company concerned doubles its fee.
“By combining these two factors, a typical client gets a worse service but their initial costs could rise from £600 to £3600. Also, brokers need to understand the ongoing fee structure their clients will be charged. Promise charges 11% per month capped at £90 but many other companies charge up to 20% per month with no upper limit.
”Brokers need to take care in choosing a partner to provide their clients with a cost effective and reliable service, including Debt Management, IVAs or Full and Final Settlements. This means understanding the applicable commercial terms. They should be mindful that setting up a flashy website and offering great commissions is easy. Delivering on the promises is another matter.”