It has just been announced that the debt management firm, PDHL, has been shut down by the Financial Conduct Authority and can no longer continue business. 

The regulatory body said it had made a number of failings and is now contacting its 16,000 customers to tell them where they can find alternative free debt management advice. Now clearly this shouldn’t have come as a surprise to PDHL, but to its 16000 customers…. I think it possibly did. 

Since taking over in 2014, the FCA has closed around 100 fee-charging debt management companies (DMC) who failed to meet the standards needed to gain authorization. These companies didn’t just have the rug pulled out from under them they would have had plenty of opportunity to correct what was wrong, but clearly didn’t manage to do enough to keep going. 

For the customers this is no bad thing, apart from the inconvenience and potential stress of changing DMC’s but I’m going to assume that after 100 closures the process to rehome them is probably pretty slick by now. For the employees sadly not such a good thing. Over the years I’ve heard about all kinds of shenanigans from collectors where some, smaller and less committed DMC’s have completed Income and Expenditure Schedules merely as a tick box exercise to ensure they hit all the trigger figures as if they were a target to achieve. We had a single chap recently who called to check we had received his IES, when we queried the high hairdressing costs. He told us he was bald and was somewhat taken aback that it had been included and oh how we laughed! Not. 

Stories of delays in making payments to creditors meaning they hang on to the customers money, sometimes for a few months before starting repayments, or making reduced or part payments to begin with even though the customers claimed they were paying their full available income to the DMC, and then there’s the fee. 

In the case of PDHL they charged up to 42% of the available income, but for a creditor to see a £30 plus fee being taken only to receive a cheque for 87p is frustrating, and whilst yes, the pressure and stress of dealing with said creditors is deferred for the duration of the DMP, the time the customer will remain in this state of stasis is inexorably extended through the ‘redirection’ of their hard earned and barely available income.

Of course we all signpost to free advice and try our best to direct those with financial difficulties to those companies who don’t charge but tight funding and high demand means that this is not always a quick or achievable solution. So a fee charging DMC is sometimes the only option and to be fair there are some very efficient ones out there, my only gripe is the volume of paperwork they churn out, multiple copies of the same letter often sent on the same day and with multiple pages the cost to woodland alone fills me with sadness let alone the cost the customer whose fee is paying for it all. 

Clearly, electronic exchange would be so much better and cost effective, as would extending the use of the Global Mandate Scheme to remove the need for signed letters of authority. On the upside, the DMC’s left when the accreditation process is complete should be top notch. Offering a slick factual and transparent service to customers and creditors and hopefully all singing from the same hymn sheet. Well that’s what I’m hoping for …what about you?

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