Business, Innovation & SkillsSupplementary written evidence submitted by the Debt Managers Standards Association (DEMSA)
RESPONSE TO WRITTEN QUESTIONS FROM THE BUSINESS, INNOVATION AND SKILLS COMMITTEE
1. DEMSA’s main aim is to help to raise standards in the debt management sector. Of course we can only directly influence our 17 members. Although they comprise the majority of the private sector by number of Plans, there is a long tail of small firms that are not members of any trade association. As we said in our evidence we are keen to see the OFT given much tougher enforcement powers to act quickly against firms that do breech the OFT’s guidance.
Firstly its important to note that the standards DEMSA imposes on its members via its OFT approved Code of Conduct are actually higher than the OFT’s own debt management guidance.
Of the 129 firms that were identified as breaching its guidance by the OFT just one was a DEMSA member and that member had already taken steps to rectify the issue. (The member in question had temporarily run out of stock of the Financial Ombudsman Leaflet that we require members send to anybody who makes a complaint. This was quickly rectified).
Naturally we are not complacent. As part of our OFT Approved Code status we put in place a robust programme to monitor members and we have recently taken steps to improve that audit process.
Our independent Compliance and Disciplinary Panel has been strengthened by the appointment of Sir Harry Ognall, a former High Court Judge, who now chairs it. He has conducted a review of both how the panel operates and DEMSA’s code and he proposed changes which we have now adopted.
Our independent audit process has been augmented by the appointment of the Institute of Chartered Accounts England & Wales which will conduct our annual audits of all members from January 2012. The audit includes checking the members’ compliance in areas such as marketing, promotions and advertising, pre-contract activity, contract terms, payments and money handling, contact with consumers and advice and compliance and training.
DEMSA is also working to drive up standards by improving training and qualifications for members’ staff. In partnership with the Institute of Money Advisors we have introduced a new debt advice qualification, developed by Staffordshire University and which is equivalent to NVQ level 4.
An addition we also monitor our members via:
Web sweeps and desktop analysis of advertising used by members on a quarterly basis.
Consumer Satisfaction Survey—all members issue surveys on a monthly basis, returned directly to DEMSA.
Mystery Shopping—undertaken by an independent organisation, calling members to ensure compliance with the DEMSA Code of Conduct.
Complaints handling—DEMSA will accept complains from consumers who have some issues with a member and will investigate and rule accordingly. This does not affect the consumers’ right to invoke the Financial Ombudsman Scheme.
2. We have had one occasion in the past 12 months where we have had to invoke disciplinary procedures against a member.
This particular instance involved DEMSA becoming aware of a member using Google Adwords in a misleading way. The practice was immediately ceased and DEMSA, through the Compliance & Discipline Panel, imposed sanctions on the member company, including a fine of £15,000. As you would expect we kept the OFT fully informed throughout the process.
At the time our Code of Conduct did not permit us to name the firm as part of our sanctions. However, we recognized this as a weakness and have already amended our Code to ensure that we are able to do so, where appropriate, in future.
3. We agree that there should be far more information available about the efficiency and outcomes of debt advice and services—from providers from all sectors. All providers have a duty of care to clients, regardless of who is funding the advice, and all should be held account for the quality of advice and services they provide.
DEMSA has not up to now published the type of data you are referring to on behalf of members although we did share such data with you as part of our submission. It is certainly something we are considering doing in the future.
4. This isn’t the issue. They key thing here is whether the debt management plan has met the objectives and aspirations of the client whilst they were using it. For example some clients take a debt management plan to enable them to regain control of their finances. Once they have a budget in place and a comfortable level of debt repayment that enables them to meet priority bills and reasonable living costs they are then happy to “go it alone” without the help of their provider. We would count this as a success not a failure.
As we said above we agree that we need to have data in place to measure client outcomes—across all types of advice provider. The correct measure of success, however, is whether the solution has met the needs of the client at the time.
5. We do not accept that there is a lack of awareness amongst people struggling with debt about the availability of free to client debt advice. The National Audit Office found that 97% of people in debt are aware of the services offered by Citizens Advice. In addition all consumers who default or fall into arrears are provided by their lenders with the OFT Information Sheet which clearly sets out the existence of free to clients providers.
DEMSA members must signpost the Insolvency Service’s guide which also sets out the range of free to client provision available.
Clients chose to use a DEMSA member firm because they place a value on the services we provide. Our members are very transparent about the services they offer and the cost of those services. DEMSA members are required to advise all consumers, pre-contract, of full details of fees charged, total costs and duration of any debt management plan. We audit this via our mystery shopping and call listening.
However, we agree with other evidence that it isn’t always easy for consumers to shop around between private sector providers. As we said in our submission we would welcome the provision of price, service and outcome comparison tables to help consumers make informed choices. The MAS would be well placed to provide these.
6. All DEMSA members will go into great detail with consumers regarding their income and expenditure and will explain the principles of budgeting, including the importance of prioritizing debts. Members will provide services to help the consumer to reduce bills for utilities etc and by using the Common Financial Statement will make it clear to consumers where they should be looking to make savings.
A key question asked of consumers in our Consumer Satisfaction Survey (not printed) is:
“8c. Overall would you say that your programme has improved your ability to cope with your financial affairs more easily?”
In 2010 97% of consumers completing the survey replied “Yes” to this question.
7 December 2011