Debtors considering entering a Debt Management Plan will usually do it with the advice and assistance of a service provider such as the CCCS, CAB and Payplan or a commercial provider of insolvency services.
The commercial providers charge a fee for their debt management advice. Charities such as CCCS do not charge the debtor directly but since they are funded by the creditors, then the creditors are arguably no better off since they do not fully benefit from the contributions made by the debtor to the Debt Management Plan.
There is no reason why a self administered Debt Management Plan should not work in theory. Since the debtor puts the plan together and is responsible for ensuring compliance with the plan and since there are no third party service providers to pay, then it would seem that such a Debt Management Plan would be attractive to creditors. From the debtor’s point of view, the debt is repaid more quickly since all of the funds are going towards reducing the balances with no ‘fees’ deduction.
So why is this not a growth industry, so to speak? From the point of view of creditors, there is the ‘hassle’ factor. The approach of debtors would differ from person to person. With commercial Debt Management Plan providers and CCCS for example, simple systems can be put in place to manage the process in a uniform way. The policy of the creditor in regard to freezing interest, penalties and other charges can be applied in a systemic consistent way. If creditors have to deal with individual customers then the workload and efficiency of their systems would be challenged. Nevertheless, the DIY Debt Management Plan can be done. The surprising thing is that creditors have not been more proactive in promulgating their receptiveness to the self administered Debt Management Plan.
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