John Fairhurst of Payplan

We spoke to John Fairhurst, Managing Director of Payplan about IVAs, fact finding and OFT guidelines...

1) What does Pay Plan do exactly?

Payplan is a major provider of telephone based debt advice. We also offer a broad range of debt solutions including Debt Management Plans, IVAs, Debt Relief Orders and supported self-help.

2) How long has the company been going and how long have you worked there?

Payplan in its current form has been in existence since 1999 and I’ve been here since early 2000.

3) Pay Plan offers a free service, so how are you funded?

Our Debt Management Plans are funded by creditors. This means that 100 per cent of our clients’ debt repayments go towards reducing their debts. Those creditors that support us (and most do) will separately pay us a monthly fee based upon the amount of their debt that we are helping our clients to repay. This money is paid on the strict understanding none of the cost will be passed on to our clients.

4) What is different to the advice you give opposed to other debt management companies?

We are proud of the sustainability of our repayment solutions and are told by creditors and IVA voting agents that our plans last significantly longer than the industry average.

5) How does the majority of your business reach you? Do you offer incentives to brokers for referrals?

The substantial majority of our new clients are referred to us by third parties such as Citizens Advice Bureaux, Trade Unions, large employers and creditors. These organisations refer to us because they want their customers/clients/members to have access to free debt advice and solutions, not because they receive a referral fee. We don’t offer financial incentives to brokers although we would hope that they would see benefit in giving their clients access to free debt advice and sustainable solutions.

6) What is an Individual Voluntary Arrangement and who is eligible for one?

An IVA is a formal insolvency procedure under which a consumer with debt problems asks creditors to agree to accept reduced payments, usually for a five year period, and then write off the remainder of the debt. IVAs are available to anyone who is technically insolvent (unable to meet their debts when they fall due for payment). Creditors vote on an IVA on a case by case basis and, for it to be binding on all creditors 75% of those voting (by value of debt) need to agree to the terms. Typically creditors will agree to an IVA where they feel that the level of repayment being offered is reasonable in the circumstances and alternatives (for example a DMP) would be unreasonably onerous. They would also expect to receive more under an IVA than if the consumer were to go bankrupt.

7) How complicated is the process?

At one level IVAs are very straightforward – in most cases the person in debt pays what they can afford for 5 years and will then be debt free (including the cost of the IVA). There are though a long list of terms and conditions covering things like changes in circumstances, dealing with missed payments and any assets (such as equity in a house). It is important for people thinking about an IVA to think carefully about all of these issues and to weigh up whether the opportunity to have some of their debts written off makes agreeing to the other terms worthwhile.

8) How many people don’t realise how many options, such as an IVA, are open to helping them emerge from debt?

It is estimated that only one in six people struggling with debts seek any advice at all. Many of the clients we speak to say that they wish they had spoken to us sooner and that they were surprised at how straightforward their debts were to deal with.

Even where people have heard of solutions like IVAs they are unlikely to know in detail how they operate – and the criteria required by creditors changes from year to year.

9) What other, less known options are available to those seeking debt management that brokers may want to refer their clients to you for?

Before we recommend a particular solution to our clients we conduct a detailed fact find. We find that many of our clients just need some basic budgeting and income maximisation advice or are able to manage their debts without on-going support from us. For those that need a more structured solution most will choose either a DMP or an IVA but we are also able to assist with bankruptcy, Debt Relief Orders and creditor enforcement action such as charging orders and use of bailiffs.

10) What do you predict happening in the debt management sector over the next couple of years?

We anticipate that , following an OFT compliance review last year that identified widespread examples of bad practice, including misleading advertising and poor advice based upon inadequate information there will be greater regulatory oversight of debt management providers. We welcome the current OFT consultation on tightening up the debt management guidelines and hope that this will be supported by further government action to establish rigorous independent audits of providers to ensure compliance and to limit the fees charged to, what are often, vulnerable consumers.

Payplan are one of the UK’s leading providers of IVA and debt management solutions.

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