SPECIALIST ADVICE FROM THE PAYPLAN TEAM ALSO LEAD STORY DEBT MANAGEMENT PLAN PROTOCOL

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1 A Newsletter for Debt Advisors. Sharing our knowledge. Supporting our industry. UK Asset Resolution Limited (UKAR) is the holding company of Northern Rock (Asset Management) plc (NRAM) and Bradford & Bingley plc (B&B) which includes Mortgage Express. Visit SPRING 2013 ISSUE 4 LEAD STORY DEBT MANAGEMENT PLAN PROTOCOL WE DEBATE THE PROS AND CONS. ALSO SPECIALIST ADVICE FROM THE PAYPLAN TEAM DEBT ADVICE FOR THE SELF-EMPLOYED & BUY-TO-LET LANDLORD

2 SPRING 2013 ISSUE 4 This material is directed at Debt Advisors in the UK who support mortgage customers of NRAM, Bradford & Bingley and Mortgage Express. This should not be shown directly to customers. Calls may be monitored or recorded & 0845 numbers may be charged at a higher rate than local and national calls and will vary between different providers. Check with your provider. UK Asset Resolution Limited. Registered Office: Croft Road, Crossflatts, Bingley, West Yorkshire, BD16 2UA. Registered in England & Wales (Company No ). Please note that UK Asset Resolution Limited is not authorised or regulated by the Financial Services Authority. Northern Rock (Asset Management) plc, Bradford & Bingley plc and Mortgage Express are part of the UK Asset Resolution Limited group. LEE USHER, REPORTS ON THE LATEST ACTIVITY OF THE UKAR DEBT ADVICE TEAM 5 OUR VIEW 6 BESPOKE DEBT ADVICE FOR THE SELF-EMPLOYED THE PAYPLAN TEAM TALK THROUGH SPECIALIST ADVICE FOR THE SELF-EMPLOYED AND BUY-TO-LET LANDLORDS 9 A BRAVE NEW WORLD? WE DEBATE THE PROS AND CONS OF THE FIRST DEBT MANAGEMENT PLAN PROTOCOL 12 DEBT AND MENTAL HEALTH COLIN TREND ON ACHIEVING INDUSTRY BEST PRACTICE 15 DEBT ARRANGEMENT SCHEME (DAS) STEPCHANGE DEBT CHARITY'S, CLAIRE ROSE, ON HOW DAS CAN HELP YOUR CLIENTS IN SCOTLAND

3 ENGAGEMENT 5 NEW WAYS TO ENGAGE, NEW WAYS TO SUCCEED with UKAR's Debt Advice Manager, Lee Usher Customer debts reduced as a result of engagement with a debt advice provider Yes No 90% 10% 3,500 UKAR customers referred to debt advice providers in ,000+ UKAR customers referred to debt advice providers in 2012 I am really proud of what we achieved over the course of last year. Helping clients manage their debts underpins everything we do at UKAR, but for many of our customers we are not the only creditor. It is therefore really important, in these circumstances, to signpost our customers to debt advice providers who can take a more holistic approach to managing the customers debt situation. UKAR's dedicated Debt Advice Team work collaboratively with internal and external stakeholders to ensure a robust identification and referral process exists within the business that engages the right customers with the right providers. UKAR's Debt Advice Manager, Lee Usher, says: We are committed to helping find the best ways of managing and prioritising debts and to deliver best outcomes for the customer. We recognise the positive impact Debt Advice can have in this regard. "We have designed and implemented what we believe to be a very effective Debt Advice engagement strategy with the support and constructive feedback from stakeholders within the Debt Advice community. Embedding a new Debt Advice referral process last year engaged record numbers of customers with independent Debt Advice providers to access the help they needed referral analysis showed more than 6000 customer referrals were achieved across the business which was almost double the number achieved in 2011! Warm transfers to Debt Advice providers, introduction of a call back facility and outbound dialling campaigns have all played a big part in achieving our increased number of referrals. It is important that our customer facing agents all understand where Debt Advice should be utilised. My team delivered awareness sessions to over four hundred agents from the point of induction of new starters through to refresher training for experienced team members. Every customer that indicates they are struggling to pay will go through an affordability assessment and where appropriate we will signpost customers to a Debt Advice provider. Last year we asked around 3500 customers for feedback following their engagement with a Debt Advice provider. 90 per cent of customers who responded said their debt levels had reduced as a result of their engagement with Debt Advice and 96 per cent of customers said they would recommend their Debt Advice provider to a friend or family member. I am really proud of what we achieved over the course of last year but these successes are only the start. A number of innovations are now being considered to build on the momentum throughout 2013 and ensure our customers are provided with the best support available to help them manage their debt effectively. What Customers Think 'Payplan provided hope and a clear direction at a time when my health was being affected by debt problems' 'StepChange Debt Charity have been brilliant, providing regular budget plans and always on hand if I need them' What You Say The team provides an open and clear point of contact for StepChange Debt Charity on behalf of our clients. They provide a balanced view with consideration for the needs of the company and strong understanding of their customer. Richard Haymes, Head of Creditor Relations, StepChange UKAR s dedicated Advice Team have created a market leading approach to engagement with the Debt Advice Community supporting all major consumer events and providing expert relationship management of key providers. Peter Munro, Head of Business Development, Payplan SPRING 2013 UKAR ARENA 5

4 6 NEW PAYPLAN PARTNERSHIP Debt advice for the Self-Employed and Buy-to-Let Landlord. New Partnership Promotes Faster Solutions and Targeted Support. We all know there is an increased need for debt advice. And the ongoing recession means more self-employed and Buy-to-Let business people than ever are looking for help and support. Payplan, one of the UK s largest providers of free debt solutions, has seen a 400 percent rise in the number of referrals being passed to them in the past two years alone with that figure expected to grow as the economic crisis deepens. Their Self Employed Team helped 10,000 people deal with financial problems during that time looking at everything from bankruptcy to tax arrears recruiting an extra 60 staff to cope with demand. Cases are varied and often complex, with the average debt totalling 35,000 compared to the typical 20,000 seen in personal finance. Earlier this month, they launched a new working partnership with UKAR designed to help fast-track those needing help and promoting early intervention and solutions. For the client it means less chance of losing their home or being made bankrupt. Here Nick Payne, Manager of Payplan s Self-Employed Team and Peter Munro, who heads the Business Development Team, talk through the move and explain more about the specific tools they re using and developing to assist those in need. Nick says: It s fair to say there has been a huge increase in the number of referrals we re getting I used to see 20 or 30 people a month, now it s closer to 500 and I only see that going one way in the future. It means less chance of losing their home or being made bankrupt. A lot of people who come to us are in turmoil, they aren t sure if anyone can help but they can t see a way out. They might be in tax arrears or have taken out payday loans one of my clients had 49 and feel there is no way out. But our team includes accountants and experts in areas like taxation to unravel what can be quite complicated problems, so we can always offer practical measures and crucially the earlier we can start working with people the better. That s why we ve developed a closer working relationship with UKAR to make sure the people that need us most can find us more easily. Peter adds: We ve been working with UKAR since 2009 and this latest initiative will allow us to build on that relationship and offer faster access to our Buy-to-Let experts. We know that UKAR has a lot of Buy-to-Let customers and from now on they ll be able to be referred straight to us, using a new dedicated number and process; ensuring people get the help they need without delay. We are aware that a lot of self-employed people don t even know that we exist, or that we are free and independent. Often it can take people a long time to reach their moment of truth when they decide to search for help, they may bury their heads in the sand because they believe that there s nothing anyone can do. But even in the most complex cases we can provide solutions. We re a one-stop shop and our team will be with clients all the way through the process. We never pass people from pillar to post once they are in a Payplan solution. They work with the same person from day one until the final day of their plan when they become debt free. Often it s about prioritising debts; coming up with a plan to allow customers to continue paying their mortgage and essentials first before then looking at a solution for non-priority debts such as credit cards and payday loans. Nick adds: We offer Debt Management Plans and specialist Self Employed IVAs; it means we can try our best to protect the things people have worked so hard for; their homes and their businesses. 400% Rise in referrals in the last 2 years 10,000 People helped in the last 2 years We can arrange an IVA which allows customers to repay their debts importantly this can include any taxation arrears over a fixed term, with allowances for living and business expenses built in. This can stop any legal action that could be pending and present a sustainable solution for everyone for clients and creditors, including UKAR. How It Works Buy-to-Let landlord John Giles*, 64, turned to Payplan after building up significant credit card debts in Desperate not to lose his six properties none of which were in arrears or be declared bankrupt, they were able to help him establish a Self-employed IVA which reduced his monthly payments from 1,300 to a manageable 400. Since then he has cleared the debt completely. As he says: My biggest fear was losing my properties, all of which were paying for themselves and which wouldn t have benefited anyone in the long run. I couldn t find any information about schemes to help buy to let landlords so Payplan were amazing. They helped me to find a way of managing that debt that reduced my risk and took away all the stress I d been going through. The owners of a hairdressing salon contacted Payplan just two weeks before their arranged bankruptcy hearing. The business had suffered because of ill health and they were using credit to pay for living expenses. Payplan arranged for the bankruptcy hearing to be postponed and put forward an IVA proposal. They assured the creditors that the IVA would provide a better return, as the current economic climate may have meant that the business did not realise its full value if sold. The creditors approved the IVA and the bankruptcy petition was dismissed. The clients income improved and their home and salon were not sold which would have been the case with bankruptcy. The clients have made every payment to their IVAA. Visit 6 UKAR ARENA SPRING 2013 *Names have been changed SPRING 2013 UKAR ARENA 7

5 Melanie Taylor (MT) Director of External Relations at DEMSA and was part of the Protocol Working Group looking at the DMPP. Andrew Smith (AS) External Affairs Representative at the Debt Resolution Forum and played an active role in the Working Group discussions. John Fairhurst (JF) Managing Director of free debt advice provider, Payplan, and was also part of the Working Group. Alistair Chisholm (AC) Creditor Liaison Policy Officer for Citizens Advice. Richard Haymes (RH) Head of Creditor Relations at StepChange Debt Charity. 9 A NEW DEBT MANAGEMENT PLAN PROTOCOL But does it go far enough? It s a great idea in theory a Debt Management Plan Protocol (DMPP) to protect financially distressed consumers who choose to seek independent and impartial debt advice. Aiming to improve standards and guarantee levels of service, it includes moves to spread previously up-front fees, signpost free advice and offer customers a fact sheet. But even as it launches, the advice sector is still divided as to its effectiveness especially as accreditation is voluntary. We have brought together representatives from the fee and free sectors to debate the pros and cons. What is your overall view of the protocol? MT: It is definitely a move in the right direction. It is disappointing that it isn t sector-wide but it s an opportunity for positive change AS: I don t think it will change a great deal. Most of the fee-charging providers belong to one of the two trade associations so are already hitting the standards the protocol will introduce. JF: We feel it doesn t go far enough; we were arguing for a much more robust regulatory framework. Most of it simply restates the existing OFT guidelines. AC: If self-regulation is going to work it has to be more comprehensive than official regulation, and this falls short of that. The protocol has the look of a document doing just enough to justify its existence but not enough to bring about the changes that consumers need. their accreditation removed if they don t meet expected standards. The main changes are spreading the set up costs over a minimum of six months, signposting to the free sector and reporting outcomes. RH: Because membership is voluntary we haven t got any information about how it s going to be monitored or how people are going to comply. We already have industry codes, so how does this fit in to those? AC: There is talk about a checking regime but again, it s not clear how rigorous this will be. I suspect there will be some adjustment to fee regimes but not enough change to end the unfairness and sharp practice that sadly blights the fee charging sector. AS: The biggest change will be to the business model used this presents a real opportunity for fee-charging companies and creditors to work together and agree how the existence of a debt management plan should appear on a credit file. Those with accreditation will be able to display the badge too, which is to their advantage. Miss-selling is rare but being protocol-compliant will lessen that. JF: You re giving a badge which from a consumer perspective says someone is accredited. So as well as trade associations we ve got another protocol layer. Does that make the landscape clearer, I m not sure? RH: As with any voluntary code it remains to be seen how it will work in practice. There are some positive steps but why not just include them in the current code? What impact will it have on debt advice providers? MT: At DEMSA we have full membership support and we plan to introduce the Protocol into our Code. So although the Protocol is voluntary, including it within our Code gives it some teeth. Protocol compliant operators can also have It has the look of a document doing just enough. SPRING 2013 UKAR ARENA 9

6 What impact will it have on creditors? MT: I don t know how familiar they all are with it because it s voluntary, getting them to sign up is one of the challenges. Although the commitment to higher standards, as well as money going to them in month one, should encourage them to support it. AS: Its importance is in setting standards and creating dialogue. We want to see creditors accepting DMPs from protocol-compliant providers. AC: Creditors are left in a difficult situation because they re dealing with the fee chargers, and they can sometimes see that the consumer is not getting a good service, even if it is expensive. Creditors may be worried that they will be held partly responsible for this consumer detriment in the future. But we wouldn t want creditors refusing to deal with un-badged companies this could leave their customers with more and more difficulty. The way to clean up the fee charging industry is for the regulator to take stronger action. We hope that the new Financial Conduct Authority will step up here. This protocol does not remove the need for this. RH: It is going to be hard for creditors to understand another layer of compliance. Earlier payments to creditors are great, if that actually happens What impact will it have on customers? MT: A lot say they don t know how to find a good provider, so it s about making informed choices. The Protocol badge will now help them to differentiate. It will be interesting to see if there s a move over to the free providers. The protection it offers aren t enough to address excessive fees. AS: It will give better service. The Consumer Fact Sheet is almost a charter and that s a big step. We ve got an opportunity to change people s view of fee-charging organisations. We account for 75 per cent of all DMPs and four out of ten of clients using fee-charging services shopped around but chose us. The free sector will have to address issues around capacity and action. JF: While the fact sheet might be useful for some consumers, by the time people look for advice they are desperate and probably not looking to shop around. We wanted someone independent to determine whether advice was balanced. What we ve got is existing trade regulators still in place. They were looking after the sector when the OFT published a report about poor advice and practice AC: There was an opportunity to have much clearer regulation but this only goes some way towards that. The protection it offers aren t enough to address excessive fees, for example, and a new badge will not add to the clarity that consumers need. RH: As far as signposting free options are concerned, would this actually happen? How will it be monitored? What will its lasting impact be? AS: It s the first step towards a statutory regime. I don t think it will be around that long but will frame the future industry. MT: It s about sustaining high standards, transparency and independently audited services, which will help raise confidence and demonstrate consumers are making informed choices. Maybe as more support is given to the Protocol, it will encourage other providers to seek accreditation. JF: In terms of the trust, it puts the onus on providers to provide better service. Only time will tell how well it will work. RH: We think we ll see a much more rigorous regime introduced by the FCA next April. AC: It indicates a recognition from parts of the industry that they need to improve but it doesn t go far enough. 25% 75% Free Fee-charging We (fee-charging providers) account for 75% of all DMP s Andrew Smith, Debt Resolution Forum (DRF) 10 UKAR ARENA SPRING 2013

7 12 DEBT AND MENTAL HEALTH Making the case for specialist help around debt and mental health what is best practice? What is TEXAS? THANKING THEM FOR THEIR TIME/INQUIRY Research clearly demonstrates that there has been a clear link between debt and mental health for a long time *. And the need to provide specialist advice and support where debts exist, presented in a relevant way, has long been recognised. Recent research shows that one in two people with a debt problem now has a mental health issue too and experts say the ongoing recession means the situation is becoming more acute **. Over the past ten years, debt advice providers have been working with clients, creditors and health professionals to create guidelines for best practice and regulation. Colin Trend is a debt advisory expert who works with the Royal Society of Psychiatrists and the Money Advice Trust to develop training programmes for dealing with customers who have mental health issues. He was part of a wider team that helped to draft MALG Good Practice Awareness Guidelines and introduce the Debt and Mental Health Evidence Form and continues to provide key insight in this area. Here, he outlines the issues facing advice providers today and best practice. As he says: We all know that debt and mental health are interlinked and casework demonstrates this. So this is a very significant area for the industry and one that we are keen to help more and more people engage with through training and best practice guidelines. As well as a moral case, there is a clear business case for dealing with customers in a supportive way one that achieves the best outcomes for them and creditors. If you looked at the way the debt advice industry and creditors dealt with mental health issues ten years ago it was a very different landscape indeed. There was no real dialogue with healthcare professionals or creditors. As advice providers of course we could tell people were ill but we weren t qualified to say that in medical terms. I was part of the first working party set up to address this in 2005, working with the advice sector and key trade bodies the BBA, FLA and CSA. One of the most significant developments was the introduction of the Debt and Mental Health Evidence Form which could be used to provide medical proof that creditors would accept in a consistent format. There are now three clear routes to obtaining this and a willingness from more creditors to accept it. We also have a clear set of MALG Good Practice Awareness Guidelines too. The current version was drawn up in 2009 and will almost certainly be looked at again this year, in response to major changes including the Welfare Reform Act. And we re finding that providers and creditors especially the larger ones are investing in training to ensure staff can handle customers needs effectively. It makes commercial sense for lenders to address mental health. The old approach calling and chasing payments day in, day out, is a huge waste of their resources. Finding out more about customers situations including their health is a more productive way forward, which is why recently we ve seen big names like RBS and HSBC invest in up to date training in their debt recovery teams. But there is still a long way to go. We haven t yet seen the payday lenders engaging with this and although Tax Credits recovery adhere to guidelines, other government departments like HMRC and DWP haven t bought into them yet. Eventually we would like this to be just another part of our industry culture. Getting the message across and encouraging debt advice providers and creditors to see the importance of it, is a vital first step. Our TEXAS tool was designed to help all frontline staff deal with customers queries as well as they can, offering the right kind of support. EXPLAIN ENSURING CLIENTS ARE FULLY AWARE OF WHAT IS HAPPENING EXPLICIT CONSENT THIS HAS TO BE GAINED IN RELATION TO OBTAINING CONFIDENTIAL INFORMATION (SENSITIVE PERSONAL DATA AS DEFINED IN THE DATA PROTECTION ACT) FROM THIRD PARTIES, FOR EXAMPLE A GP OR COMMUNITY PSYCHIATRIC NURSE ASK FINDING OUT MORE: IMPACT ON FINANCES, COMMUNICATION AND IF THIRD PARTY SUPPORT IS AVAILABLE SIGNPOST DIRECTING CUSTOMERS TO THE RELEVANT SOURCES OF HELP AND SUPPORT There has always been a clear link between debt & mental health. *Office for National Statistics, 2002(a). A higher proportion of consumers with mental health problems report debt on every single indicator than those without similar conditions. **In the Red: Debt and Mental Health. Mind,2007. Jenkins R, Bhugra D, Bebbington P, Brugha T, Farrell M, Coid J et al. Debt, income and mental disorder in the general population. Psychological Medicine 2008; 38: Mental health resources are available on the MALG website malg.org.uk MAT training is available from moneyadvicetrust.org 12 UKAR ARENA SPRING 2013

8 15 THE DEBT ARRANGEMENT SCHEME (DAS) How DAS can help your clients in Scotland. They ve been an effective tool in the Scottish financial advice industry for some time. But in the past, availability of Debt Arrangement Programmes (DPP) under the Debt Arrangement Scheme (DAS), through approved money advisors in the free sector has been limited. StepChange Debt Charity has been looking at this legislative tool for some time and now they are able to offer them to Scottish customers. They are adding DPPs to their debt tool kit in a bid to provide even more tailored solutions for those facing financial hardship. As StepChange s Claire Rose explains, they feel that the framework brings benefits for debt advisors, creditors and clients. So what exactly is DAS? And how can they be used? Claire says: Put simply DAS is a legislative tool that already operates in Scotland and the DPP is the plan it offers. It has been in existence since 2003 and is the UK s only statutory debt management tool. DAS is a legislative tool that already operates in Scotland and the DPP is the plan it offers. It has been in existence since 2003 and is the UK s only statutory debt management tool. 13,000 Average debt of those signing up to a DPP What makes it different from a standard debt repayment plan is the statutory element that means that it has real teeth. You can t prioritise debts; they re all paid on a pro-rata basis, over the same fixed term whether that s something quite small like a payday loan or mortgage arrears. The average debt for those signing up to a DPP is 13,000 and advisers and clients have to weigh up the pros and cons together. There are lots of potential benefits to customers. If you are making repayments through a DPP, creditors are forced to stop adding interest and charges and they re not allowed to continue pursuing the debt. Any enforcement has to stop too and assets are protected and like any arrangement it will appear on a customer s credit file for six years. It can be flexible too. If debtors experience a change in material circumstances they can apply for a variation to it but for someone who might need to do this regularly because their income fluctuates perhaps someone self-employed a DMP might be a better option. There is no up-front application fee either. On the downside, it is a formal arrangement and its governing body is the Accountant in Bankruptcy (AiB), and sometimes just the mention of a legally binding solution puts some people off. Clients will be listed on the DAS register too, a public document that anyone can view. There are conditions too. Clients have to keep up with their financial obligations even those not covered directly by the DPP. So, for example, if a debtor falls behind with their council tax repayments, their plan could be revoked. The fee structure is different as well. The client will always pay an amount equal to the total they owe but up to ten per cent of that will be written off by creditors and paid to administrators. The ten per cent is used in the following way. Every month the Accountant in Bankruptcy takes two per cent of the payment, then the Payments Distributor (from a panel of four, appointed via a tender process every four years) retains a fee of up to eight per cent. These and other stages of the process are all administered via the Debt Arrangement Schemes Hub (DASH) a secure, webbased portal. Once an application has been made, creditors have 21 days to approve or reject the offer and the Accountant in Bankruptcy (AiB) adjudicates when cases are disputed. At StepChange we re looking to be able to offer all clients online and via telephone a DPP by the end of the year. We have just started offering them to our telephone clients, and we ve started to put the systems in place that will allow us to do the same for our online clients before the end of the year. We hope it will prove to be a tool that allows us to continue raising outcomes for creditors and customers in future. Visit SPRING 2013 UKAR ARENA 15

9 Our key debt advice partners: SPRING 2013 ISSUE 4 To let us know your thoughts and views about UKAR ARena, us at debtadviceteam@ukar.co.uk To sign up to the distribution list for future e-zine copies of UKAR ARena please debtadviceteam@ukar.co.uk