debt management plan

How a Debt Management Plan (DMP) can help

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Most people in debt that can’t afford the repayments use a Debt Management Plan (DMP). They help people who can afford to make some debt repayments each month but cannot afford to make the repayments at their current level.

You can only deal with unsecured debts via a Debt Management Plan. They cannot be used to help you deal with a debt that is secured against your property, such as a mortgage. However, they are usually structured in such a way that your mortgage payments are prioritised over your unsecured debt to ensure that you don’t fall behind on your mortgage payments and potentially lose your home.

Table of Contents hide
1 How Does a Debt Management Plan Work?
2 How Do You Set Up a Debt Management Plan?
3 Getting Your Lenders To Agree
4 Get Confirmation of Any Agreement
5 How Much Does a Debt Management Plan Cost?
6 How Does a Debt Management Plan Affect Your Credit Score?
7 Read More…

How Does a Debt Management Plan Work?

Under a Debt Management Plan your lenders agree to a restructuring of your debts to make the monthly repayments affordable. They can do this in a number of ways.

First, they can extend the period in which you will repay your debts. This means that you will be paying a lower amount each month although it also means that you will be paying that lower amount for longer.

Second, they can reduce or freeze the interest rate. Note that if your lenders agree to lowering your monthly debt repayments by extending the repayment period but keep the interest rates the same it could mean that you ultimately end up paying more via a Debt Management Plan.

Bear in mind that a Debt Management Plan is an informal arrangement. This means that even if your lenders agree to a Debt Management Plan there is nothing to stop them changing their minds at a later date and reverting to the previous repayment levels. In practice they won’t do this unless you fail to keep up the repayments or your situation changes in a meaningful way, though.

Having said that, as a Debt Management Plan is an informal arrangement there is nothing to stop you changing its terms or cancelling it completely if your situation changes either. As an example, if you received an unexpected windfall you might decide to stop the monthly repayments and pay off your outstanding balance in one go.

How Do You Set Up a Debt Management Plan?

You can set up a Debt Management Plan on your own, but many people use a debt management company.

Either you or the debt management company will calculate your income and expenditure to work out what you can afford to pay towards your debts each month. Then a proposal is put to your lenders asking them if they will accept your Debt Management Plan.

Your lenders are not required to accept your proposal. Even if they agree to some form of Debt Management Plan they may want to make changes to your initial proposal.

Once the Debt Management Plan has been set up each of the lenders gets paid a smaller amount each month. If you have used a debt management company to help you then usually you will pay that company one single payment each month and they will allocate the money to each lender.

Debt Management Plans can usually be set up in a matter of days. Depending on your circumstances and the debt management company that you use, it can even be possible to have a Debt Management Plan set up on the same day.

Getting Your Lenders To Agree

Your lenders are unlikely to agree to a debt management plan if you simply ask them to freeze the interest on your debts and accept that you’ll only be paying half as much each month as you were previously. They are going to want to see that you have given some thought in terms of how you will repay your debts and you will need to convince them that your debt management plan has reasonable prospect of success.

This might mean that you need to make some difficult choices. A lender is more likely to accept your debt management plan if part of that plan is selling your car because it costs too much to run, for instance. That shows that you are prepared to meet them half way. Similarly, if you have taken on a second job to increase your income that would also show that you are making a reasonable attempt to address your financial situation.

Get Confirmation of Any Agreement

Although a debt management plan is an information arrangement, it is important that you get any agreement from your lenders in writing to avoid potential misunderstandings in the future.

If you have sold your car it might be that you have offered a one-off payment to your lenders from the money you received from the sale as part of the debt management plan. You don’t want to find out at a later date that they are claiming that they didn’t realise that your one-off payment formed part of the plan.

If you agree a debt management plan with your lenders, generally they will adhere to that plan even though it is only an informal agreement and they are not legally obliged to do so. If they decide to take you to court, though, provided you can demonstrate in writing that you had an informal agreement and can show that you have stuck to the agreement the court will look favourably upon you. The court won’t waive your debt at that point, but it will be an influencing factor when they set the level at which you need to repay the debt each month.

How Much Does a Debt Management Plan Cost?

Some debt management companies will charge for their services. There may be a fee to set up the Debt Management Plan, a fee to handle the monthly payments or both. It is important that you check whether any fees will be charged so you understand what your Debt Management Plan will cost.

But it is also worth remembering that some debt management companies are better than others. It might be worth paying slightly more if that means you get a debt management company that has a better track record when it comes to getting interest rates frozen, for instance. Other debt management companies have a better track record when it comes to getting lenders to agree to lower repayments.

As well as checking what fees you may be charged, you should also ensure that the debt management company you use is authorised by the Financial Conduct Authority.

How Does a Debt Management Plan Affect Your Credit Score?

If you’ve found yourself in a position where you need to consider a Debt Management Plan to resolve your financial difficulties, it’s likely that your credit score is already fairly low. And in the short term that won’t improve because you’ll be paying less than you are supposed to be paying towards your debts.

But the good news is that over time a Debt Management Plan should make your credit score better. This is because provided you keep up the repayments, your Debt Management Plan should improve your financial position.

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The Data Protection Act 1998 requires every data controller who is processing personal data to notify the Information Commissioner of any breaches no more than 72 hours after becoming aware of it unless they are exempt from doing so. Failure to notify is a criminal offence.  In addition, any FCA regulated firm must notify the FCA – ideally within 24hrs of discovery of a breach.

This document should be read in conjunction with our Acceptable Use policy and Information Security policy which form part of the Employee’s Handbook.  We are committed to protecting and respecting privacy.

This policy sets out the basis on which any personal data we collect from a consumer will be processed by us.

For the purpose of the Data Protection Act 1998 (“the Act”), the data controller is Nerd FS.

By visiting and using our website the consumer is consenting to the practices set out below.

If our firm needs to collect data for any purpose not stated above we should notify the Information Commissioner before collecting that data.

Whenever collecting information about people, our firm agrees to apply the Eight Data Protection Principles:

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The use of data for marketing purposes

For marketing purposes, there are two types of data:

Data obtained in-house

Data obtained from third parties

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We have taken measures to guard against unauthorised or unlawful processing of personal data and against accidental loss, destruction or damage.

This includes:

Customers Right to Withdraw Consent

The customer has the right to withdraw their consent at any time. The withdrawal of consent shall not affect the lawfulness of processing based on consent before it’s withdrawal. However, it does mean you can no longer rely on consent as your lawful basis for processing. They withdraw consent by either of the following; putting this in writing to address details, by calling telephone number or emailing email address.

As the right to withdraw is ‘at any time’, it’s not enough to provide an opt-out only by reply. The individual must be able to opt out at any time they choose, on their own initiative.

In some cases you may need to keep a record of the withdrawal of consent for your own purposes – for example, to maintain suppression records so that you can comply with direct marketing rules. You don’t need consent for this, as long as you tell individuals that you will keep these records, why you need them, and your lawful basis for this processing (eg legal obligation or legitimate interests).

Subject Access Request (SAR)

One of the main rights which the Data Protection Act gives to individuals is the right of access to their personal information.  An individual is permitted to send us a subject access request (“SAR”) requiring that we tell them about the personal information we hold about them, and to provide them with a copy of that information.  In most cases we must respond to a valid subject access request within 40 calendar days of receipt.  Any business is able to charge a customer a reasonable charge of £10 for providing this data however it is not our companies policy to do so unless the request is excessive or unwarranted.  Any Subject Access Requests must be sent to a Senior Manager for processing purposes.

Third party requests are also permitted e.g. a friend or relative, a solicitor, a claims management company or other third party. Under the Data Protection Act 1998 and the Data Protection Principles, are not permitted to reveal such information to a third party without the authority of a customer. On this basis, for any third party SAR, we will ensure that we have a written record of authority held on file before we release any personal data.

Where there are two or more customers linked to one credit agreement and the request comes from one of these parties, we will provide the response to both parties

We are required to 'give' a copy of the executed agreement and any other document referred to in it and the required statement. In the FCA’s view, sending a copy of them by ordinary second class post will suffice. Guidance on what constitutes a ‘copy’ can be found in the case of Carey v HSBC Bank plc [2009] EWHC 3417 (QB).

The duty under the relevant section does not apply if no sum is, or will or may become, payable by customer under the agreement. This is irrespective of whether the agreement may have already been terminated.

We will promptly facilitate a SAR request, although we have up to 40 days to do so.  All staff are made aware of this during induction.  Refresher training will be provided on a regular basis.  Although the rules permit the Firm to charge a maximum of £10 for responding to the request for personal data, it is not the Firm’s own policy to do so.

Client consent to the application of the Act and their right to access to their records are included within the firm’s terms of business/client agreement.

Any data collected must not be excessive and must be relevant to the purpose and it must not be kept longer than is necessary.

Information Commissioner’s Office (ICO)

The ICO has the power to issue monetary penalty notices of up to £500,000 for serious breaches of the Data Protection Act occurring on or after 6 April 2010, and serious breaches of the Privacy and Electronic Communications Regulations.

Privacy

Our Privacy policy is in full view on our website.  This section must be read in conjunction with the Privacy Policy.

It is the responsibility of the senior management of our firm to ensure this policy is effective through monitoring and complaints procedures.

All employees, affiliates and ARs dealing with customers have a responsibility to read, understand and implement this policy and to hold their own valid and appropriate Privacy policy where appropriate.

The Firm holds a valid Data Protection license and it is bound by the rules of the Data Protection Act 1998.  The full extent of the rules can be found at www.dataprotection.gov.uk.

The 8 principles that the 1984 Act introduced are as follows.  Data must be:

Criminal offences

A criminal offence is committed by the Firm or an individual member of staff if they knowingly or recklessly:

Uses of customer information

When submitting application forms to banks, insurance companies and other financial institutions, this means that personal data will, by default, also be submitted.  In these cases, clients will be informed that their personal data may be used.

The Firm will request client consent before any transfer of data takes place.  Clients will be asked to confirm that they are comfortable to have their personal data used in one or more of the following forms:

Post, telephone, email etc. subject to the conditions of the Data Protection Act.

Information Classification

 Definitions

The following definitions provide a summary of the information classification levels that have been adopted by our firm and which underpin the 8 principles of information security. These classification levels explicitly incorporate the Data Protection Act’s (“DPA”) definitions of Personal Data and Sensitive Personal Data, as laid out in our firm’s Data Protection Policy.

‘Confidential’ information has significant value for our firm, and unauthorised disclosure or dissemination could result in severe financial or reputational damage to us as an FCA authorised firm, including fines of up to £500,000 from the Information Commissioner’s Office.

Data that is defined by the Data Protection Act as Sensitive Personal Data falls into this category. Only those who explicitly need access must be granted it, and only to the least degree in order to do their work (the ‘need to know’ and ‘least privilege’ principles).  When held outside our firm, on mobile devices such as laptops, tablets or phones, or in transit, ‘Confidential’ information must be protected behind an explicit logon and encryption at the device, drive or file level.

‘Restricted’ information is subject to controls on access, such as only allowing valid logons from a small group of staff. ‘Restricted’ information must be held in such a manner that prevents unauthorised access i.e. on a system that requires a valid and appropriate user to log in before access is granted. Information defined as Personal Data by the Data Protection Act falls into this category. Disclosure or dissemination of this information is not intended, and may incur some negative publicity, but is unlikely to cause severe financial or reputational damage to our firm.  Note that under the Data Protection Act large datasets (>1000 records) of ‘Restricted’ information may become classified as Confidential, thereby requiring a higher level of access control.

‘Internal use’ information can be disclosed or disseminated by its owner to appropriate members of our firm, partners and other individuals, as appropriate by information owners without any restrictions on content or time of publication.

‘Public’ information can be disclosed or disseminated without any restrictions on content, audience or time of publication. Disclosure or dissemination of the information must not violate any applicable laws or regulations, such as privacy rules.  Modification must be restricted to individuals who have been explicitly approved by information owners to modify that information, and who have successfully authenticated themselves to the appropriate computer system.

Designating information as ‘Confidential’ involves significant costs in terms of implementation, hardware and ongoing resources, and makes data less mobile. For this reason, information owners making classification decisions must balance the risk of damage that could result from unauthorised access to, or disclosure of, the information against the cost of additional hardware, software or services required to protect it.

Examples

Security Level

Definitions

Examples

FOIA2000 / DPA1998 status

1. Confidential

Normally accessible only to specified and/or relevant members of our staff

DPA-defined Sensitive personal data:

·                     racial/ethnic origin

·                     political opinion

·                     religious beliefs

·                     trade union membership

·                     physical/mental health condition

·                     sexual life

·                     criminal record

·                     salary information

·                     individuals’ bank details

·                     passwords

·                     large aggregates of DPA-defined Personal Data (>1000 records) including elements such as name, address, telephone number.

·                     HR system data

Subject to significant scrutiny in relation to appropriate exemptions/ public interest and legal considerations.

2. Restricted

Normally accessible only to specified and/or relevant members of our staff

DPA-defined Personal Data (information that identifies living individuals including:

·                     home / work address

·                     age

·                     telephone number

·                     schools attended

·                     photographs

Subject to significant scrutiny in relation to appropriate exemptions/ public interest and legal considerations.

3. Internal Use

Normally accessible only to our staff

·                     Internal correspondence,

·                     internal group papers and minutes,

·                     information held under license company policy and procedures

Subject to scrutiny in relation to appropriate exemptions/ public interest and legal considerations

4.  Public

Accessible to all members of the public

·                     Company filed documents

·                     Company websites

Freely available on the website.

Explicit Information Ownership and Other Rights of Access to Information

We recommend that departments and functions within our business explicitly designate information owners.

Other users may have rights of access to data according to the terms of engagement under which the data was gained or created.

Granularity of Classification

The sets of information being classified should, in general, be large rather than small. Smaller units require more administrative effort, involve more decisions and add to complexity, thus decreasing the overall security.

 Information Retention

There may be minimum or maximum timescales for which information has to be kept. These may be mandated in a commercial contract. Other forms of information retention may be covered by environmental or financial regulations.

Responsibilities

All ‘Users’ must obtain authorisation from their line manager before their classification request is submitted to Senior Managers. Nerd FS is responsible for assessing information and classifying its sensitivity.

Violations

A violation of our Information Security Policy and supporting policy documents will be investigated and consequentially may result in disciplinary action which could include the termination of employment contract for employees, the termination of contractual relations in the case of third parties, contractors or consultants.

A violation of this policy and misuse of the systems and applications within our firm may also be a breach of the Computer Misuse Act 1990; consequentially the company may at its discretion take legal action against an individual or organisation that is found to be in breach of its policies.

How we may use customer data

 We may as a result of a consumer or a third parties’ interaction with our website/s obtain their personal data and process their information on our computers and in any other way.

By “third parties” we mean any lender, broker or affiliate who interacts with us in enabling a consumer to make a loan application.

We will use the information to manage their account(s), give them statements and provide our services, for research, assessment and analysis (including credit and/or behaviour scoring, market and product analysis) and to develop and improve our services to the consumer and other consumers and protect our interests.

We, and other carefully selected third parties, will use their information to inform them by post, fax, telephone or other electronic means, about other products and services (including those of others) which we believe may be of interest to them.

If they contact us, we may keep a record of that correspondence.

We will keep details of transactions they carry out through our site and of the fulfilment of their applications and their loan history.

We will keep details of their visits to our site including, but not limited to, traffic data, location data, weblogs and other communication data and the resources that you access.

In order for us to be able to collect and use personal data and / or to pass If they do not want us to use their data in this way, or to pass their details on to third parties for marketing purposes, customers must manually opt in to this agreement (See CONC section of this Compliance Manual).

IP Addresses

 We may collect information about their computer, including where available their IP address, operating system and browser type, for system administration and to report aggregate information to our advertisers. This is statistical data about our users' browsing actions and patterns, and does not identify any individual.

Cookies

 For the same reason, we may obtain information about a consumer’s general internet usage by using a cookie file which is stored on their browser or the hard drive of their computer. Cookies contain information that is transferred to their computer's hard drive. They help us to improve our site and to deliver a better and more personalised service. Some of the cookies we use are essential for the site to operate.

If they register with us or if they continue to use our site, they agree to our use of cookies.

Please note that our advertisers may also use cookies, over which we have no control.

Cookies can be blocked and a consumer may not be able to access all or parts of our site. Unless a consumer has adjusted their browser setting so that it will refuse cookies, our system will issue cookies as soon they visit our site.

Where we store data

The data that we collect from a consumer is stored within the European Economic Area ("EEA"). Such staff may be engaged in, among other things, the assessment and fulfilment of a consumer’s application, the processing of a consumer’s bank details and the provision of support services. By submitting their personal data, they agree to this transfer, storing or processing.  We will take all steps reasonably necessary to ensure that a consumer’s data is treated securely and in accordance with this privacy policy.

All information a consumer provides to us is stored on our secure servers. Any transactions will be encrypted. Where we have given (or where they have chosen) a password which enables you to access certain parts of our site, they are responsible for keeping this password confidential. We ask a consumer not to share a password with anyone.

The transmission of information via the internet is never completely secure. Although our systems exceed industry standards for security, and we will always do our best to protect a consumer’s personal data, we cannot guarantee the security of a consumer’s data transmitted to our site; any transmission is at their own risk. Once we have received their information, we will use strict procedures and security features to try to prevent unauthorised access.

Disclosure of information

We may disclose a consumer’s personal information to any member of our group, which means our subsidiaries, our ultimate holding company and its subsidiaries, as defined in section 1159 of the UK Companies Act 2006.

We may disclose a consumer’s personal information to third parties:

Credit Reference Agencies (CRAs)

When a customer makes an application for a credit, we will check whether they are likely to be able to meet the monthly payments and repay the loan.  However, we are limited in what we can actually do as we do not work directly with CRA’s as we are not eligible to do so.  We will work with what the applicant divulges on their fact find/application but we can only judge as accurately as the information given allows.

When we submit an application to a lender, it is normal practice for a lender to carry out a credit search with a CRA.  In the past, this would have left a search ‘footprint’ on the applicants’ credit file that may be seen by other lenders. Large numbers of applications made within a short period of time would adversely affect a customer’s ability to obtain credit, and they should always consider this before making an application for a loan.

However, the lenders that we have chosen to deal with offer a facility known as a ‘quotation’ search, which does not leave a footprint. This is in line with CONC 2.5.7 which suggests that during the ‘shopping around’ process of the customer, the lenders that we promote should only use a ‘quotation search’, which does not leave a footprint.

Access to information

The Act gives a consumer the right to access information held about them. Your right of access can be exercised in accordance with the Act. Any subject access request may be subject to a fee of £10 to meet our costs in providing them with details of the information we hold about them.

Changes to our Privacy Policy

 Any changes we may make to our privacy policy in the future will be posted on our web page, and, if appropriate, notified to consumers by e-mail.

Questions, comments and requests regarding this privacy policy are welcomed and should be addressed to moneynerduk (at) gmail.com.

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