Debt plan that didn’t pay off
Years after being promised she would be free of debt a woman was still paying thousands of pounds to the company she trusted to deal with her creditors. Elizabeth Bastow’s experience at the hands of debt manager Apex DCM Money Solutions was traumatic.
When she signed up to its plan in autumn 2002 DCM promised to clear all unsecured debts in five years.
The 50-year-old office worker, who owed £18,705 to various card companies, said: “I didn’t want the bankruptcy stigma but my back was against the wall. DCM’s solution seemed fast and efficient. I paid an affordable £200 each month.”
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Elizabeth does not appear to have been given details of what kind of plan she had or critically whether interest and charges on her debts would be frozen. Debt plans and their laws are notoriously complicated and clients mostly vulnerable. Since industry regulation in 2007 matters have improved. Standards however still vary. When Elizabeth first sought help it was a playground for profiteers. Just weeks before her five years were up she got DCM’s devastating news that she still owed £11,333.85 and she would not be debt-free until around June 2012.
By way of explanation the Nottingham-based DCM told her: “The management have gained significant experience since first starting the business and have learned many lessons.”
Appalled at the callous treatment and suspicious of why she still owed so much Elizabeth complained to the Financial Ombudsman Service which ruled out investigating as her arrangement was made pre-regulation.
Last summer, overwhelmed by the burden, she came to Crusader for help. “I have now paid almost as much as I first owed but am still thousands in debt,” she said.
One aspect especially upset her: for years DCM had retained between £2,000 and £3,000, which was a proportion of her monthly payments. “I realise they need some kind of deposit in case I default but this seems excessive,” she said.
ClearDebt, a management company committed to raising industry standards, investigated with Crusader whether Elizabeth had received a fair deal and if she could do better. She is now a ClearDebt customer, it has waived its 17.5 per cent administration fee and is negotiating final settlements.
“I’m so grateful, it’s just wonderful to have people who care,” she said.
Although previously Elizabeth seems to have been poorly served, the measure DCM took of retaining her money is not illegal so long as any interest earned benefits the client. DCM’s 10 per cent charge was deemed to be modest.
Elizabeth’s debt dragged on primarily because interest and charges weren’t frozen. DCM could have avoided this by organising an individual voluntary arrangement (Iva), a solution where with agreement of all parties a debtor repays a percentage of their debt.
“If an Iva had been do-able, by August 2007 we have calculated Ms Bastow would have paid £12,000 and the remaining debt written off. As it was she still owed more than £11,000,” confirmed ClearDebt’s Andrew Smith, who is unable to understand from the information he has why the Iva didn’t happen.
There were other key questions for DCM, such as why it dismissed Elizabeth’s breach of contract complaint, why it retained such a large proportion of her monthly repayments and where the interest went and what’s happened to £2,056 of her money still apparently unaccounted for.
DCM has refused to comment but says it will consider any complaint. Crusader has raised this case with regulator The Office of Fair Trading and the Financial Ombudsman Service is reinvestigating.
Visit cleardebt.co.uk If consulting a debt manager ensure it belongs to a reputable trade body. More free advice at financial-ombudsman.org.uk; insolvency.gov.uk/pdfs/guidanceleafletspdf/indebt-web.pdf; citizensadvice.org.uk; nationaldebtline.co.uk or cccs.co.uk
