Pros and cons of Debt Managment Agencies

Whatever services the OP offers, it certainly isn't cheap. I do wonder about the wisdom of someone deep in debt paying out up to €500 in initial fees and another potential €1200 a year after that. If i was a creditor and was contacted by you, I'd be thinking, if the debtor can afford to pay this company, they can afford to pay me.

kaplan said:

@fostie debt managers are listed as by the OFT and they are not regulated - they are licensed by the OFT and required to comply with its code. Readers should consider the OFT's compliance review for insight into its concerns which have also been reflected here in Ireland.

Your point on solicitors is a deflection - debt managers are payment service providers and will have to be authorised and supervised by the central bank. They have a [broken link removed] in the UK where the OFT has recently cracked down - see here also and here

Can you point to an independent, objective commercial justification of the business model by a reputable agency?

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How can you say they are not regulated, when you post about how the OFT has come down on DMCs who do not follow the rules?

I agree completely with what the OFT has done, and agree completely with heavy regulation in the industry here. DEMSA and the DRF are consistently working with the OFT to improve not only the image, but also the operation of DMCs in the UK. The UK also has the CCCS which is not-for-profit, as MABS is here.

You seem to be keen to bundle all DMCs into the one basket. My point re solicitors money, is that here you have good solicitors, legitimate solicitors, but you also have the 'bad eggs' who misappropriate client funds. In the UK, reporting procedures are in place to act against DMCs who do this from outside and inside the industry.

Why are you so against commercial debt management? The debtor pays, not the taxpayer. And if someone is taken to court for a debt, they will usually employ a solicitor at a much higher cost, who will deal with the single issue of that debt in the court, whereas reputable DMCs charge very modest amounts of money to professionally deal with every aspect of a client's financial difficulties, including handling the distribution of payments for the client and in most cases preventing the issue getting to court at all.

Mpsox said:

Whatever services the OP offers, it certainly isn't cheap. I do wonder about the wisdom of someone deep in debt paying out up to €500 in initial fees and another potential €1200 a year after that. If i was a creditor and was contacted by you, I'd be thinking, if the debtor can afford to pay this company, they can afford to pay me.

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If it was the case that creditors did not agree at all, there would not be a business, but the creditor is satisfied that the offer on the table, usually a pro-rata payment according to the amount owed, is all that the client can afford. Half a loaf is better than no bread at all, it means that they are no longer spending money on debt collection measures and legal costs persuing debts which may ultimately prove irrevocable, or too expensive to collect. Most creditors accept the legitimacy of what we do. By the way, in most cases here, with some of the less reputable DMCs, €500 is the minimum payment. To give you an example, our fees average at €220, with approx €30 a month being the normal monthly fee.

You would need a serious amount of disposable income to end up paying €1200 a year in fees, and if you had this disposable income, you would need to have an incredible amount of debt to be on a plan long enough

We do this from the point of view that if someone can only afford €200 a month, if going with another DMC, the creditors will not get paid for four months. This leaves the client out on a limb for too long, and leaves them exposed to whatever measures the creditor may decide to take. Anyone who comes to us for help, as should be the case with ALL DMCs, should get assistance immediately, and again it is something that we need regulation to support.

Debt managers in the UK are not regulated - there is no legislation governing their activities. You have not addressed my question which is your opportunity to demonstrate why commercial debt managers should exist at all.

Can you point to an independent, objective justification of the business model by a reputable agency? One that is backed up by empirical evidence and facts- not the soft sell rhetoric and marketing hype of relieving people of stress?

Read the thread as to why the practice is justifiable! It works for creditors, who ultimately decide whether or not to accept a repayment proposal, and it works for the debtors, who would otherwise not enter a plan if they could reasonably manage on their own. It gets debts repaid, the person in debt pays for the servicing of their own debts, MABS cost €18million to run last year, and dealt with 18000 enquiries. This cost the taxpayer €1000 for every person they dealt with! And yet we have people contacting us for assistance, because MABS were unable to assist them. And by the way, I think it's extremely cynical to cite 'relieving people of stress' as marketing hype and rhetoric. When you hear some of the cases of attempted suicide and families splitting up at the coal face of this debate, people we deal with every day, you may be a bit more reasoned in your approach.

Enough of the rhetoric and PR spin of relieving people of stress and preventing suicides - it's an exploitative, abusive and manipulative sales pitch to flog debt management plans to vulnerable financially unsophisticated people.

You answer is again a deflection - can you justify with supporting reputable evidence the economic business case for commercial debt managers? You might also indicate whether or not your business has been required to justify authorisation as a payment service provider by the central bank.

kaplan said:

Enough of the rhetoric and PR spin of relieving people of stress and preventing suicides - it's an exploitative, abusive and manipulative sales pitch to flog debt management plans to vulnerable financially unsophisticated people.

You answer is again a deflection - can you justify with supporting reputable evidence the economic business case for commercial debt managers? You might also indicate whether or not your business has been required to justify authorisation as a payment service provider by the central bank.

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Financially unsophisicated people? So everyone in debt in the country is financially unsophisticated?

Re Authorised payment service provider, no we are no required to do so, and if you had read the thread you would see that this what we believe is required. We are also not required to register with the Data Protection Commissioners, despite holding sensitive information, again something I do not agree with. Apart from that, you are badgering about a lack of regulation, when I have said from the outset that I want to see regulation in the industry, so that people like yourself with a rigid pre-determined judgement without knowing the ins-and-outs, have nothing further to complain about! What more do you want to hear?

Lets look at this another way, if you were critically ill, would you spend four months on a waiting list or would you go private? Same thing here, people are in critical need of help with their finances, and nobody is forcing them to use our service, but better that they get help as soon as they can, than sit in the dark as things get worse.

From an economic case, if it works for the creditor as I have shown above, and it works for the debtor, as I have also shown above, who are the only parties concerned here, what difference does it make what your opinion is? I think I've more than answered your questions at this stage.

frostie said:

MABS cost €18million to run last year, and dealt with 18000 enquiries. This cost the taxpayer €1000 for every person they dealt with! .

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MABS stats reports say they dealt with 25000 cases in 2010 and that their helpline has taken 30000 calls in the 12 months ending q2 2011.

I'm not questioning your competence or the need to regulate your industry (badly needed), I just find profiting from others misery distasteful.

For an entity only incorporated last April you make quite extensive claims to have relationships with "creditors" by which you probably mean regulated credit institutions.

Perhaps you might explain why you imply on your website that your company is a member of two UK associations. I note the site says frost.ie is "part of the Frost Group" which is quite a small insolvency practice based in Croydon, London.

You have not justified your business model yet.

Don't want to continue the argument but I think there is a need from something between DM companies and MABS. In fact I think MABS should charge for their service within reason, there should certainly be some sort of donation system where those that can afford something should pay it. To simply divide out the cost of MABS per client doesn't really work either because a lot of their clients are long term who will never be able to manage their money on their own, the original clientele that it was set up for, MABS will be part of a team including social workers, cwos etc dealing with a proportion of their clients.

The newer debt problems 'the new poor' as we will call them with mortgage debt, possibly a buy to let as well, who are unable to manage because of the loss of one or more jobs are the ones who are swelling the MABS waiting lists. Some of these still have income and not much budgeting skills due to never having to do it in the good times, I would sooner see them make a reduction in their eg Sky sub and pay a token amount for the service of MABS. Obviously for cases where there is totally insufficient income then this contribution should be waived but it would help pay something towards the service or the money could be donated to the svdp or whatever. Sometime people appreciate a service more if they have to pay for it.

kaplan said:

For an entity only incorporated last April you make quite extensive claims to have relationships with "creditors" by which you probably mean regulated credit institutions.

Perhaps you might explain why you imply on your website that your company is a member of two UK associations. I note the site says frost.ie is "part of the Frost Group" which is quite a small insolvency practice based in Croydon, London.

You have not justified your business model yet.

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Yes we do have very good relationships with regulated lenders and trade creditors. Yes we are part of the Frost Group, licenced insolvency practitioners in the UK recognised by the IPA and Institute of Chartered Accountants in England and Wales, yes we are members of IPA and R3, and yes you have managed to use both google and cro.ie, and yes all of this information as you quite rightly point out is on our website for anyone to see. What are you talking about justifying the business model, it's pretty straight forward. Starting to wonder who's trolling right now!

wbbs said:

Don't want to continue the argument but I think there is a need from something between DM companies and MABS. In fact I think MABS should charge for their service within reason, there should certainly be some sort of donation system where those that can afford something should pay it. To simply divide out the cost of MABS per client doesn't really work either because a lot of their clients are long term who will never be able to manage their money on their own, the original clientele that it was set up for, MABS will be part of a team including social workers, cwos etc dealing with a proportion of their clients.

The newer debt problems 'the new poor' as we will call them with mortgage debt, possibly a buy to let as well, who are unable to manage because of the loss of one or more jobs are the ones who are swelling the MABS waiting lists. Some of these still have income and not much budgeting skills due to never having to do it in the good times, I would sooner see them make a reduction in their eg Sky sub and pay a token amount for the service of MABS. Obviously for cases where there is totally insufficient income then this contribution should be waived but it would help pay something towards the service or the money could be donated to the svdp or whatever. Sometime people appreciate a service more if they have to pay for it.

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You're right, MABS was originally intentioned for ordinarily low-income families and individuals, to deal with the likes of utility bill arrears and smaller debts etc but demand for their services has mushroomed because of the downturn, and they simply cannot cope with demand caused as a result of the mortgage crisis and credit-fuelled explosion.

Funny you mention Sky, it's one of the first things that stands out as an issue when we do an income and expenditure, and the first instruction is that they must reduce it - they don't have to get rid of it, but switching to the basic package is €50 a month less. We wouldn't even put it to creditors with €75 a month for Sky, for the simple reason, they wont accept the proposal.

Part of what we also do, because so many people are relatively new to the Social Welfare system is to look into any benefits they can claim, and this can mean the difference of several hundred a month, and the difference between having a disposable income or not, to help them pay their bills, for example, many believe that jobseekers isw the only benefit they can get if they have lost a job, and don't even know about Family Income Supplement. We make sure that they get the full picture, and whatever they are entitled to in order that they can pay their debts.

No trolling going on here - you are the one who opened the thread and invited scrutiny.
When you say you are part of the Frost Group - which, established in 2005, is quite a small company having a net worth of Stg174k on last filed accounts - does this mean you are a wholly owned subsidiary company? Or are you simply a stand alone Irish company some of whose directors and sharholders are also directors and shareholders of Frost Group? What relevence does Frost Groups' membership of the IPA and Institute Chartered Accountants have to the operations of a debt management company in this juridisdiction - I note that Frost Group appears not to be a debt manager in the UK.

Mpsox said:

MABS stats reports say they dealt with 25000 cases in 2010 and that their helpline has taken 30000 calls in the 12 months ending q2 2011.

I'm not questioning your competence or the need to regulate your industry (badly needed), I just find profiting from others misery distasteful.

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I have to say that what we do is no different to what a solicitor or any other counsellor etc would get paid for, and it's a professional service. You are right though, and I agree that profiting from others misery is distasteful, but only when it is done in an ethically corrupt way, which if you look at the start of this thread, you'll see that it's exactly what I am warning people about. Ripping off vulnerable people is wrong. Pure and simple, and exactly what I was saying when I started this thread.

[broken link removed]

Debt Manager High Profit Business Model Exposed

@ frostie/Frost Debt Solutions Ltd here’s a worked example of a debt management plan using your fee structure.

Couple with two kids having a mortgage and three other debts. Their net available disposable income available for loan repayments after paying their mortgage is €500 per month. They owe €25,000 on their three other debts in equal proportion.

You would charge €500 for selling and setting up the plan and then charge €75.00 per month for the life of the plan which at €425 per month would last 60 months, if all three lenders agreed to freeze interest. If not then the plan would extend out for another 12-16 months. But let’s assume you are as well known to these lenders as you say you are and you manage to agree the repayment schedule.

The couple will pay €500 for the plan, €25,000 to their lenders and a whopping €4425.00 in monthly fees to you. In short your fees will amount to 19.7% of the amount owing. I’ve been generous as I haven’t included for Vat which would reduce payments to the lenders by €15.75 a month extending the number of months to 61 months in which case you trouser €5075.00.

So the larger the monthly payment you "arrange" for, the larger your monthly fee and hence profits. And the larger the debt owing the longer your plan becomes generating even higher profits.

Can you explain why you think charging such exorbitant fees is fair and reasonable? What happens if the company closes down? How solvent are you to support your ongoing operations? Can you list the lenders with whom you have agreements in place through which they accept payment proposals? How many staff do you employ and where are they located? Is it not the case that your plans are voluntary and lenders can continue with legal debt enforcement actions?

Equating professional legal or accounting services to selling debt management plans is balderdash. Are you saying that selling debt management plans is a professional service? Why? Who are your Irish principals and what qualifications do they have - your website is silent on this. You might answer the other questions posed above as well.

Firstly, if you think I'm listing all of the information you are asking for here, you are dreaming, because firstly the information would be of use to our competitors, secondly, there are no 'agreements' in place, the creditor decides on each proposal on it's merit and our reputation and trust earned from the companies we negotiate with, is why we are successful.

The agreements are not legally binding - again read the thread for the umpeenth time - and the creditor is perfectly within their rights to pursue the client on their own but they do not in 99% of cases. If they took the client to court and the income and expenditure was presented, it would not only add to the collection costs to the creditor, but the offer put forward would be considered reasonable by any judge as all of their personal financial circumstances are presented. The companies we negotaite with are also entitled to carry out credit searches to see if other undisclosed debts are present, so it not worth anyone's while to hide debts for preferential treatment.

You can have other experience prior to the formation of a company, and our insolvency practitioners have over 80 years experience between them and have previously worked for KPMG and PWC to name a few. We are an Irish company with directors in both companies, based in Donegal. Frost Group is now a DMC in the UK but the majority of the work comes from liquidations, bankruptcies etc. We also have a network of QFAs who recommend us to their clients.

You cannot also arbitrarily say that a client has €500 disposable income. It takes time to establish this, after an initial consultation free of charge which can take up to two hours without obligation, and time to negotiate the plan in the beginning, which is why there is an initial fee. Unlike MABS which is funded by the taxpayer, when people pay this fee which they don't have to pay with MABS, they immediately show a commitment to clear their debts.

And I believe the fees are justifiable. A persons home is protected as we also deal with their mortgage problems, we investigate what extra benefits they can get to boost their income, we deal with any arrears they have on utilities and hire purchase issues, their unsecured debts are in hand, they don't have to juggle multiple payments, the plan is flexible and allows for unforeseen circumstances in the future, and allows for increased or decreased payments depending on their change in circumstances, the phone isn't ringing off the hook from the three creditors, they have a single point of contact for all creditors, and under terms of agreements made on their behalf, we also carry out 3, 6 and 12 monthly reviews of the clients circumstances. So yes €800 a year for a person in this situation would be a small price to pay to be debt free in 5 years.

VAT is also NOT applicable, and as you seem to have had the whole day on your hands, you can verify this with revenue, although I do have it in writing from them. Facilitation of an agreement on debt is VAT exempt as we do not assume the debt like a debt collection does. I appreciate your concern for the solvency of our company too, but you don't have anything to worry about there. And yes, on those conditions mentioned in general, interest and charges would be frozen with 99% of creditors unless the borrower was extremely reckless and got a 6k credit card for example, and just drew it all out in cash - there's no chance they would freeze the charges on that basis.

Can I ask what your solution would be, as you have plenty of questions, but few answers. Should people wait for MABS to help for three or four months and end up being told that they can't be helped (as has happened many of our clients - MABS is triage at the moment due to their workload), should they go to a solicitor and pay even more, should they go to the bank for debt consolidation loan and pay 18%+ in interest if unsecured, or extend their mortgage term into old age (a loan which would never be granted anyway), should they release whatever equity they have in their home, and again wait until this is refused, should they cancel their life insurance policies to save a few quid and live on grass?

We're open and honest about all of our dealings with clients, as you've got most of this info from our website. I'd appreciate if you'd spend as much time going after the less reputable companies I mentioned earlier - google debt management and they'll appear - and I can guarantee you wont find any of the information readily available from us, as easy to access, and as the thread started, these are the guys I'm chasing for misleading advertising and bad practice.

Debt manager transparency lacking in detail

Here's a list of questions you haven't answered yet:

When you say you are part of the Frost Group - which, established in 2005, is quite a small company having a net worth of Stg174k on last filed accounts - does this mean you are a wholly owned subsidiary company?

Or are you simply a stand alone Irish company some of whose directors and shareholders are also directors and shareholders of Frost Group?


Are you saying that selling debt management plans is a professional service? Why? Who are your Irish principals and what qualifications do they have - your website is silent on this.

Can you explain why you think charging such exorbitant fees is fair and reasonable?

What happens if the company closes down?

How solvent are you to support your ongoing operations?

For an entity only incorporated last April you make quite extensive claims to have relationships with "creditors" by which you probably mean regulated credit institutions. Can you list the lenders with whom you have agreements in place through which they accept payment proposals?

How many staff do you employ and where are they located?


Perhaps you might explain why you imply on your website that your company is a member of two UK associations. I note the site says frost.ie is "part of the Frost Group" which is quite a small insolvency practice based in Croydon, London.

What relevence does Frost Groups' membership of the IPA and Institute Chartered Accountants have to the operations of a debt management company in this juridisdiction - I note that Frost Group appears not to be a debt manager in the UK.

You might also indicate whether or not your business has been required to justify authorisation as a payment services provider by the central bank.

Can you point to an independent, objective justification of the business model by a reputable agency? One that is backed up by empirical evidence and facts- not the soft sell rhetoric and marketing hype of relieving people of stress?

Try reading the last post

Surprise, no answer to ANY question as yet that I have asked

kaplan said:

Here's a list of questions you haven't answered yet:

When you say you are part of the Frost Group - which, established in 2005, is quite a small company having a net worth of Stg174k on last filed accounts - does this mean you are a wholly owned subsidiary company?

Or are you simply a stand alone Irish company some of whose directors and shareholders are also directors and shareholders of Frost Group?


Are you saying that selling debt management plans is a professional service? Why? Who are your Irish principals and what qualifications do they have - your website is silent on this.

Can you explain why you think charging such exorbitant fees is fair and reasonable?

What happens if the company closes down?

How solvent are you to support your ongoing operations?

For an entity only incorporated last April you make quite extensive claims to have relationships with "creditors" by which you probably mean regulated credit institutions. Can you list the lenders with whom you have agreements in place through which they accept payment proposals?

How many staff do you employ and where are they located?


Perhaps you might explain why you imply on your website that your company is a member of two UK associations. I note the site says frost.ie is "part of the Frost Group" which is quite a small insolvency practice based in Croydon, London.

What relevence does Frost Groups' membership of the IPA and Institute Chartered Accountants have to the operations of a debt management company in this juridisdiction - I note that Frost Group appears not to be a debt manager in the UK.

You might also indicate whether or not your business has been required to justify authorisation as a payment services provider by the central bank.

Can you point to an independent, objective justification of the business model by a reputable agency? One that is backed up by empirical evidence and facts- not the soft sell rhetoric and marketing hype of relieving people of stress?

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troll

@frostie
You opened this thread and have been posting elsewhere as a lead generation marketing tool.

You are declining to answer questions that cut to the heart of your business model which is to sell debt management plans.

Getting uppity when your thin marketing veneer is stripped bare contradicts your alleged transparency.

Commercial DMP's are high risk consumer products and you have done little to deal with this fundamental aspect of your business. Good at talking up what you would have people believe are the pro's you have failed to deal with questions exposing the con's.