Andrew Smith of ClearDebt Group

We spoke to Andrew Smith, of ClearDebt Group, to find out how his company actively campaigns, his involvement with the Debt Resolution Forum, and a bit about what he thinks the major challenges facing the industry in the future are...

Firstly, what exactly does the ClearDebt Group do?

ClearDebt Group is an AIM-listed holding company for ClearDebt Limited – which is the IVA specialist company – and Abacus – which is the debt management specialist company. We are a commercial debt solutions provider.

When ClearDebt entered the industry, the company offered the lowest IVA fees. As a result, we were visited by a number of creditors who wanted to see how IVA companies operated with such low fees. The company was also very influential in the composition of the IVA Protocol, my boss David Mond and I were both able to make contributions to this.

We strive to be a company that campaigns. For example we had a leading role in drumming out companies who tried to persuade people to go for bankruptcy when they were already in an IVA that was appropriate to their needs.

What is your role within the company?

My role is Marketing & External Affairs Director at ClearDebt Group PLC. I represent ClearDebt within the industry and to creditors, government, the press and other opinion formers.

What kind of debt management advice do you give?

There are three arms to the company and we offer IVAs, DMPs and give advice to people in the process of having their homes repossessed.

Could you tell us a bit about the Debt Resolution Forum?

The Debt Resolution Forum (DRF) is made up, at the moment, of 29 companies, though more are set to join. We offer training, monitoring standards and complaints handling for our members.

DRF is also coming close to the end of its Stage One OFT Approval. We work closely with the OFT and strive to put their recommendations in place.

A few years ago, DRF created the Certificate in Debt Resolution which has now been taken or is being taken by around 600 people. DRF is planning to introduce a diploma in 2012. This will help members to meet new OFT guidance. For example, if a company wants to give advice either regarding benefits or vulnerable customers then they will be well advised to get advisors with specialised training.

A year ago, we also introduced independent monitoring by the Insolvency Practitioners Association. A member is subject to a five day inspection in their first year, which is carried out by two inspectors, and then, if that all goes well, they are subject to a three day inspection in their second and third years. The inspections are detailed and diligent: the inspectors monitor calls, examine processes and procedures, case files etc to give debtors, creditors and the government etc. reassurance that DRF members are as compliant as they can be. We want to ensure that standards exceed new guidance.

David Hawkes, of Advice UK, chairs the independent committee which hears complaints against our members.

DRF is not just about creating rules and regulations for our members to follow, it is also very active in representing members; for example, we are currently discussing with the OFT ways of using a monitoring or auditing system to give DRF members access to lead introducers. Members must do their due diligence before using lead introducers and also, where possible, make sure they hold a CCL licence. We are working to produce a product which we think the OFT will see as helpful.

What is your involvement with the Forum?

Similar to my role with ClearDebt, I am responsible for, communicating DRF’s views to the press and the government etc.

What did you do before you began working for ClearDebt?

I actually had my own communications company for 12 years. My clients included those in the debt solutions industry, such as R3 (the Association of Business Recovery Professionals). I also did a lot of work for a significant number of legal and accountancy firms in insolvency.

My first job, however, was in politics – I used to be a researcher for Michael Heseltine.

What do you think is the biggest issue in the debt management industry at the moment?

I think it is a failure to understand that there are some very significant challenges ahead (bigger than the issues facing the industry at the moment). Once the OFT guidance is in place and the FCA replaces the OFT I think the OFT guidance will form the basis of a set of rules and raise the compliance burden. We need to robustly challenge the idea of a level playing field between fee and free, and to explain that free advice is not always the most appropriate in order to create a level playing field.

What do you predict happening in the debt management sector of the next couple of years, particularly with regard to regulation?

I think a debt management plan protocol, as envisaged by the Insolvency Service, will make DMPs a less profitable product, but I hope that it will start to be linked to tools, like the enforcement restriction order and the simple IVA, which are tools that government could easily introduce.

We have the potential to become the best of breed in the Europe and create a more competitive market which will inevitably drive down margins. If organisations are to survive they will need to become more efficient, more adaptive and more organised. Companies need to act fast enough to face the future.

If you weren’t working at ClearDebt and involved with DRF what do you think you would be doing instead?

I would be attracted by politics – it’s the only game for grownups. If I did not become a politician (and I’m not sure I’m cutthroat enough for it) I would probably have become either a historian or a teacher.

What, in your experience, are some of the most common reasons for individuals becoming indebted?

I have clear views on this subject. I think a relatively small minority really do shop until they drop; my gut feeling is that it’s only one in five.

Most people who become indebted do so as a result of some form of economic shock.

The common misconception is that debt worsens during the recession but in fact there is a direct relationship between availability of credit and those who are insolvent. Whilst the previous generation saved up to go on a holiday, this generation put their holidays on their credit cards because they were confident that they can repay it. People calculate that they can afford the repayments, perhaps at a steady rate of, say, ten months. However, if they become redundant, ill or go through a separation the ability they had to make steady repayments vanishes. Even a good thing occurring can affect debt. For example, imagine a couple with two incomes and no kids. Once the woman gives birth, the family now has one income and one child. All that needs to happen is they forget to pay a zero per cent credit card once and they have to pay 14.9 per cent forever. If they also break their overdraft limit, they may have to pay £3-400 in charges. When the mother finally goes back to work, she is also likely to be earning 40-60 per cent less and, on top of that, have to pay childcare costs.

What we find at ClearDebt is that we don’t receive many customers with babies, what we do get is customers with toddlers - clearly showing that it takes a few years for people to to understand that they can’t repay their debts.

As an industry, we need to get creditors to accept that defaulting debtors are their future customers. People need to take advice early, but they fear the consequences. Creditors, working collectively with compliant debt resolution companies could create a culture of debt rehabilitation that would benefit them, our industry – and Britain.

Debt Solutions | Debt Management Advice London | Debt Help Leicester | Debt Management Bedfordshire | Debt Management Birmingham
In Debt? Dealing With Your Creditors
Medianett Network Bridging & Commerical | Bridging and Commercial Distributor | Loantalk | Mortgage Recovery | Bridge Doctors

DebtManagementToday.co.uk is a trading style of Medianett Ltd.. Medianett Ltd. is registered in England and Wales.
Company Registration Number 05938228. VAT Registration Number 926 5359 02
Registered office: 12 Addison Court, Brondesbury Road, London NW6 6AS. Data Protection Notification No: Z164 5525 | Privacy Policy