Download Annual Report 2013 - Debt Managers Standards Association

DEBT MANAGERS STANDARDS ASSOCIATION LTD
DEMSA
ANNUAL REPORT 2013
CONTENTS
1. REPORT OF CHAIRMAN
2. CODE OF CONDUCT
3. MONITORING OF THE CODE
4. COMPLAINTS HANDLING
5. COMPLIANCE AND DISCIPLINARY ISSUES
REPORT OF CHAIRMAN
Having assumed the role of Chairman in October 2013, I would first of all like
to pay tribute to Michael Land, who was instrumental in founding DEMSA
back in 2000 and under whose stewardship DEMSA has grown to an
organisation that now represents some 80% by volume of the fee charging
debt management sector. Michael stood down as Chairman in 2013, although
remaining as a Board member, and I am sure that all members will join me in
acknowledging his immense contribution to the association.
During 2013 membership grew by the addition of two new members, however
due to consolidation in the market the actual number of members remained at
21 at the year end. For 2014 DEMSA has increased the range of membership
options available which it is hoped will increase our connection and influence
across the sector.
The Office of Fair Trading (OFT) closed it’s Consumer Codes Approval
Scheme on 31 March 2013 and accordingly our Code was accepted into the
scheme operated by the Trading Standards Institute (TSI). Trading Standards
has a long standing reputation of protecting the consumer and our Code is a
good fit into the TSI scheme, and will continue to drive higher standards.
On the regulatory side we have been exercised during 2013 with firstly the
introduction of the Debt Management Plan Protocol and secondly the
inception of the Financial Conduct Authority, due to take responsibility for
Consumer Credit on 1 April 2014.
DEMSA has been involved from the outset in the formulation and the
introduction of the DMPP, which was headed by the Insolvency Service. Upon
introduction on 1 October 2014 a substantial numbers of DEMSA members
were accepted in to the Protocol, with the remainder committed to becoming
compliant by 1 April 2014.
The Financial Conduct Authority issued it’s consultation in December 2013
and DEMSA will be responding and will continue to work with the FCA to
ensure that proper rules are established with effect from 1 April.
The coming year of 2014 will be a challenging one for the sector and we
remain confident that the existence of our Code and the adherence to it will
stand our members in good stead during the introduction of the new
regulatory regime.
R F Watson
Chairman
January 2014
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CODE OF CONDUCT
The DEMSA Code of Conduct was launched in 2002 and received formal
approval by the Office of Fair trading under the Consumer Codes Approval
Scheme on 5 November 2008.
The Code is intended to cover key areas of concern to the consumer, who at
the time of approaching such an organisation as a debt manager are at a
vulnerable stage and who need careful counselling and who need to be given
the best advice.
The key areas covered are:

Clear, accurate and truthful advertising of debt management services

The provision of clear, transparent and accurate information to enable
a consumer to make an informed judgement, including written
estimates and information on cancellation rights

Fair, clear and transparent terms and conditions

Proper handling and disbursements of clients monies

Best advice and acting in the clients’ interests at all times

Fair and easy to access complaints procedures with the availability of
an independent redress procedure in addition to, but not excluding the
Financial Ombudsman Scheme.
The Code is intended to be a dynamic document, and has been subject to
changes and amendments in order to incorporate and take account of
changes in legislation and guidance and changing market conditions and
activities. Currently the Code is being reviewed and assessed against the
Money Advice Service Quality Framework for Organisations.
Following the closure of the Office of Fair Trading Consumer Codes Approval
Scheme the Code was accepted, with effect from 1 April 2013 into the Trading
Standards Institute Consumer Codes Approval Scheme.
Promotion of the Code
The code is an important asset for the accredited members of DEMSA and
both DEMSA and the members continue to promote the Code by ensuring
that all consumers are aware of the Code and by including the DEMSA and
TSI logos on all marketing and promotional material and websites.
Within, and outside the debt management sector DEMSA continues to
promote the existence and value of the Code and TSI approval.
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DEMSA AND THE DEBT MANAGEMENT MARKET
With the current membership of 22 DEMSA incorporates approximately 80%
of the fee charging debt management sector.
Total number of plans
Total amount of debts managed
Total amount of annual repayments made
Total number of new plans taken on during year
Average amount of unsecured debt per client
272,134
£4,800,376,767
£378,391,171
56,975
£17,639
Taking into account the remainder of the fee-charging sector and including the
free to client sector we estimate the size of the current market overall at:
Total number of plans
Total amount of debts managed
Total amount of annual repayments made
Total number of new plans taken on during year
Average amount of unsecured debt per client
740,000
£12,380,000,000
£980,000,000
194,000
£16,500
In addition to Debt Management Plans DEMSA members, and other debt
managers including the free to client sector will advise on other solutions,
including Individual Voluntary Arrangements (IVA’s), Debt Relief Orders
(DRO’s),Bankruptcy, Protected Trust Deeds and Debt Arrangement Schemes
(Scotland).
DEMSA members always aim to give the best advice possible in dealing with
their clients and to this end will also look at all areas where income
maximisation and cost reduction may be possible within a clients budget. PPI
issues will also be examined.
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MONITORING OF THE CODE
Monitoring of the adherence of members to the Code is an important aspect
of ensuring that the effectiveness of the Code is properly tested and shown to
be sufficiently robust to ensure the required level of consumer protection.
The effectiveness of the Code of Conduct, and DEMSA, in maintaining
standards is assessed by:

Web Sweeps and Desk Top Analysis

Customer Satisfaction Surveys

Compliance Audits

Mystery Shopping

Complaints Handling

General Information Received
Web Sweeps and Desk Top Analysis
Members’ websites are swept on a regular, minimum quarterly basis. And in
addition checks are made on all advertising material, social media, sms
messages, adwords etc to ensure that the marketing of debt management
plans and other financial solutions provided by members of DEMSA is closely
monitored to ensure that consumers are not being misled and are provided
with transparent, clear and truthful information regarding these products and
services. In addition the DEMSA Code requires that members ensure that all
business acquired through third parties and introducers is properly and
compliantly conducted at the point of sale.
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Customer Satisfaction Surveys
Customer Satisfaction Monitoring has been continued during the year by
means of the well established Customer Satisfaction Survey. Surveys are
issued by members with response coming directly to DEMSA and 10% of the
members customer base will be surveyed during any one year.
The survey asks the consumer to give their views and experience on a
number of different areas:





Initial Contact
Information provided before contract
Written information provided
Operation of debt management programme
Overall Satisfaction
A weighted scoring system is used which is designed to give priority to
fundamental issues covered by the Code of Conduct and this gives ratings
from “Excellent” to “Poor”
CSS Surveys Issued/Responses Received.
2010
7162
1326
19
CSS Surveys Issued
Responses Received
Responses %age
2011
9710
1819
19
2012
18442
2439
14
2013
19571
1537
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Details of Ratings achieved under weighted scoring system
Excellent
Good
Satisfactory
Below Satisfactory
Poor
Totals
2010
704 53
284 21
162 12
63 5
113 9
2011
944 52
350 19
246 14
117 6
162 9
1326
1819
2012
1353 55
417 17
328 13
153 6
188 8
2439
2013
865 56
289 19
167 11
93 6
123 8
1537
In 2013 86% of all respondents awarded a weighted score of satisfactory or
better, which is slightly up from 85% the previous year.
However in the actual questions asked of respondents only 2.0% of all
respondents (2012 – 1.7%) gave a rating of poor when answering the
questionnaire.
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Compliance Audits
All members are subjected to a full compliance audit on an annual basis and
any new members joining are fully audited before being accepted. The audit
also incorporates and takes account of other monitoring measures including
results from customer satisfaction surveys, mystery shopping and call
monitoring.
During 2013 all audits were conducted on behalf of DEMSA by the Institute of
Chartered Accountants in England and Wales (ICAEW). ICAEW is a world
leader of the accountancy and finance profession with over 140,000 members
worldwide and is a recognised supervisory body for audit, insolvency and
designated professional bodies. In addition, during 2013 members were
subjected to a separate audit undertaken by the ICAEW for entry into the Debt
Management Plan Protocol.
The audit covers various areas:









Marketing, Promotions and Advertising
Pre – Contract Activity
Contract Terms
Payments and Money Handling
Contact with Consumers and Advice
Business Status, Practices and Procedures
Skills, Knowledge and Experience
CCAS Core Criteria Checks
Provision of IVA’s
Any member not achieving the required standard is subject to strictly
determined action planning to correct any issues raised and in the event of
failure to achieve the required outcomes disciplinary action, including
suspension or termination of DEMSA membership can be invoked.
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Mystery Shopping/Call Monitoring
All members are subject to an independent mystery shopping exercise, and
also are required to provide DEMSA with recorded calls for monitoring
purposes. These calls are selected by DEMSA on specific dates and times
and are sampled during the year. The purpose of the exercise is to monitor
the interface between debt managers and their clients, particularly at the point
of sale, and to confirm that full and transparent information and best advice is
given to consumers at all times. Close monitoring takes place in the following
areas:







Understanding of Debt Management Programme
Adequacy of Information Provided
Costs and Estimates
High Pressure Selling
Cancellation and Withdrawal Rights
Awareness of DEMSA and the Code of Conduct
Provision of IVA’s.
Individual calls covering the selling of a debt management plan can last a long
time, up to 90 minutes in some cases.
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COMPLAINTS HANDLING
Complaints Handled by DEMSA
DEMSA has a laid down complaints procedure to which all members
subscribe. This does not preclude the consumer from utilising the Financial
Ombudsman Service scheme and is additional, rather than instead of this
scheme. All members’ complaints policies are in accordance with the
guidelines provide by the Financial Ombudsman.
114 complaints were received and dealt with by DEMSA during 2013, which is
a decrease from 152 in 2012.
As a proportion of the total number of plans held by DEMSA members
(272,000) this represents only a minimal percentage. (0.05%)
A summary of the complaints handled is set out below:
Number of Complaints
2010
44
2011
116
2012
152
2013
114
17
8
8
11
77
14
5
20
118
6
15
13
66
12
36
0
8557
2917
7709
1500
18215
9985
3806
575
Service Issues
Formulation of Plan
Ending of Plan
Adequacy of Information
Refunds Made (£)
Ex Gratia Payments Made(£)
Of the 114 complaints handled 88 (77%) were in respect of Debt
Management Plans with 26 (23%) relating to Individual Voluntary
Arrangements. 45 of the complaints were considered justified and 69
considered not justified.
112 complaints were resolved following the intervention of DEMSA with a
further 2 which were not able to be resolved deciding to take the option of
further referral to the Financial Ombudsman.
All DEMSA members are covered by the FOS scheme and during the year
160 referrals were made directly to the scheme. Of these 22 were upheld by
the FOS scheme and in total an amount of £23,879 was paid by way of
compensation.
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COMPLIANCE AND DISCIPLINARY ISSUES
Compliance and Disciplinary Procedures are in place, which give strength to
the Code by their structured, binding and independent approach.
An Independent Panel is in place to consider any actual or potential breaches
of the Code and to decide on any disciplinary action which may need to be
taken. The Panel is under the Chairmanship of Sir Harry Ognall, retired High
Court Judge, and the procedures are reviewed and revised as necessary.
The Panel is convened on notice of a potential breach of the Code, which may
come from any of the following sources:

A consumer complaint

As a result of a Compliance Audit

As a result of information received from any other form of monitoring of
the Code undertaken by DEMSA, which will include Mystery Shopping
and Customer Satisfaction Surveys.

A complaint from another member

A complaint from another source, including lenders and other
consumer bodies.
During 2013 the Panel was convened on one occasion to consider a
disciplinary issue relating to a member
After a full investigation the member was censured regarding the issue.
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