ClearDebt welcomes BIS Select Committee report on Debt Management

ClearDebt welcomes the report on Debt Management and other consumer credit matters issued today by the House of Commons Business, Innovation and Skills Select Committee.

ClearDebt welcomes the report on Debt Management and other consumer credit matters issued today by the House of Commons Business, Innovation and Skills Select Committee and endorses the comments made on it by Debt Resolution Forum’s chairman, and CEO of ClearDebt, David Mond, who said:

This report is published at a time of great change in debt resolution, with new guidance from the OFT expected shortly, with changes in funding and access to debt advice being put forward by the Money Advice Service and with the possibility of the development of a protocol compliant or regulated debt management plan being put forward by the Insolvency Service.

“Little of this has been taken fully into account by the committee’s report.

“However, the DRF welcomes a number of the committee’s recommendations, including powers for regulators to ban harmful products and a fast track procedure to suspend credit licences. The DRF believes the latter would be best achieved by properly resourcing the OFT and its successor, the Financial Conduct Authority (FCA), rather than introducing a fast-track procedure that could lead to compliant businesses having licences suspended without due process, something that would almost certainly force a viable business into insolvency.

“DRF supports full transparency regarding debt management companies’ fees, something that has been achieved by the members of trade associations like DRF. We do not however support the phasing out up-front fees, which effectively remunerates companies for the high proportion of the work that is done at the beginning of any debt management plan in setting them up.

“The DRF wholeheartedly welcomes the committee’s recommendation that there should be an effective audit of debt resolution companies’ client accounts. Industry practice in this area is not consistent and could lead to real consumer harm in the event of a company’s insolvency. The DRF will be putting forward standards to address this”.

DRF spokesman and ClearDebt marketing and external affairs director, Andrew Smith, made the point in evidence to the committee that a clear danger to consumers was businesses which didn’t operate their client accounts properly.

Hear Andrew Smith’s november 2011 statement to the Committee:

The Committee recommended that there should be effective auditing of client accounts. For ClearDebt, that means:

  • All client funds are paid into client accounts
  • Clearly designated client accounts which the bank MUST treat as ring-fenced for clients (i.e, in the event of insolvency the bank could not set off monies due to them against these accounts)
  • No interest accrues on the balances
  • No bank charges are debited to the client accounts.
  • Monthly reconciliations are performed to show that there are sufficient monies in the client account to cover all liabilities
Further reaction from Andrew Smith to today’s report by MP’s can be heard below:

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