DEMSA condemns dubious debt management companiesWednesday 8th June 2011
The Debt Management Standards Association (DEMSA) has slammed rogue traders following a BBC investigation which broke the news that some debt management companies have been holding on to clients’ money rather than paying it to creditors.
Michael Land, Chairman of the DEMSA, advised any customer seeking to use a debt management company to look for the DEMSA and OFT logo for reassurance that they are dealing with a reputable firm which is committed to the high standards set out in the DEMSA Code of Conduct.
Mr Land said: “DEMSA condemns in the strongest terms these completely unacceptable practices and we support the OFT in taking tough action against these rogue firms in the debt settlement industry.”
Under the terms of the OFT debt management guidance notes, any monies held on behalf of consumers must be kept in a client account not usable by the firm for the purposes of its own business.
Kevin Still, director at Atlantic Financial Management, said: “As DEMSA’s most recent member, Atlantic Financial Management has joined at a crucial stage in the evolution of the debt solution market, where consumer’s require absolute confidence in the providers they use to obtain all-round debt advice and, if appropriate, a managed debt solution. This must include demonstrable evidence that their paid funds are held in a client account and promptly distributed to their creditors. Monthly statements are a minimum requirement.
“Consumer education needs to be improved with the regard to some of the so called ‘hybrid’ operators that are not genuine Debt Management Companies, where funds are not disbursed to creditors, but instead a ‘war chest’ is built up by the provider to offer debt settlement offers to the client’s creditors. We are hopeful that the updated OFT Debt Management Guidance will highlight unacceptable practices and those that can cause consumer detriment.”
DEMSA is the only trade body in the sector to have received approval of its code under the OFT’s Consumer Codes Approval Scheme. As the principal trade body in the sector it works closely with the OFT to help promote high standards in the industry.
Membership of DEMSA is reliant upon debt management companies being able to demonstrate that they comply with the standards set out in the DEMSA Code of Conduct. All members are subject to ongoing stringent checks to ensure they adhere to the both the Code and OFT guidance.
Mr Land added: “DEMSA ensures that all its member firms have safeguards in place to protect the consumer. All member firms have to keep customers’ money ring fenced in trust accounts and provide a compliance certificate that they are maintained satisfactorily by a chartered accountant. Firms belonging to DEMSA must also pass on clients’ payments to the consumers within five working days.”
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