Tuesday 31 January 2012

Exactly What Financial Consultants Should Let You Know

By Sonia Ware


There is considerable variation in the standard of service a debtor is likely to get when seeking debt advice from various debt advisers. The Office of Fair Trading (OFT) has published a helpful booklet on its website which summarises the type of debt advice you should expect to get. It is entitled 'Getting Help with your Debts' and it is well worth a read.

The first matter to know about is that in the UK, debt advisers can be split into two groups: those that offer free services and those who charge for their services. Irrespective of which category your debt adviser falls into, the quality of debt advice should be the very same.

Debt advisers can do a number of things. Their principal role is to review your finances, explain financial information to you and give you advice on your specific debt situation. For example they might advise you regarding which debts you should consider paying off first such as your mortgage. This is sometimes called the process of prioritizing your debts. They might also advise you on ways of budgeting so as to make your money go further. With your permission, they might also contact the people to whom you owe money, i.e. your creditors, and explain your financial situation to them with a view to agreeing a repayment plan with them on your behalf.

The OFT advises you need to give careful thought to the question of choosing a debt adviser and you should exclusively do business with debt advisers that have a consumer credit licence which is issued by the OFT itself. You should check this out yourself on the OFT website by researching the Consumer Credit Register.

No fee advice on debt matters is accessible from a variety of providers including Citizen's Advice Bureau (CAB), National Debtline, the Consumer Credit Counselling Service (CCCS) and a number of other not for profit organizations. The OFT booklet referred to previously gives contact details for a number of these providers or you may obtain their contact details yourself by looking on line.

There are also numerous professional fee charging debt management companies and you can find these quite easily on line or you can identify them from their advertisements in the mass media. While most of these give some free initial preliminary personal debt advice, they are commercial operations and so are in the business of making a profit. Before agreeing to avail of their services and before you hand money over, make sure you ask about the cost of their services and be really clear about when you have to pay for such services. If possible you ought to establish the magnitude of these costs in writing before you agree to anything, bearing in mind that a number of these companies do not charge up-front fees and some of them do. In any event, there is usually a limit to the amount of free advice they will give, as you would expect from any business which is not funded by the state or by lenders.

Before you sign a contract for the provision of debt advice, make sure you know exactly what is going to be done for you. Summarize your queries regarding fees in writing and make sure you get answers to your satisfaction before going forward. Specifically the contract for a debt repayment plan ought to reveal to you the total cost of the service, what service fees are payable at the start of the agreement and what service fees are payable throughout the life of the contract, whether you might get any of your money back and when, how much money will be paid to each of your lenders and when they will be paid, if and how your debt repayment plan will or is likely to have an affect on your credit rating and whatever you need to do if you wish to end the service anytime in the future. Even when you use a non fee charging organization, you should ask all these questions if anything is unclear. If cold callers come to your home without your invitation, don't give them any personal information and if you want to avoid being cold called on the phone, register your contact information with the Telephone Preference Service (TPS).

Finally, before signing the agreement, ask your debt adviser who you should contact in the event that anything goes wrong in the future or if you have a complaint about the service. Remember that in the eventuality of something going wrong and the company does not address your complaint or the issue to your satisfaction, you should contact the Financial Ombudsman Service.

Regardless of the type of solution you attempt to address your debt issues there are a number of things you should do to manage your finances. You need to prepare a budget to determine how much money you have coming in and going out so that you can calculate how much is left over to enable you to pay your bills. You need to keep paying your bills, particularly your priority debts such as your mortgage (or rent) and your utility bills. Continue to communicate with the people to whom you owe money and keep your debt adviser fully informed of their letters and calls and of your replies. It may be that your debt adviser takes over this role and if so make sure that you pass over any communications from your creditors and report any telephone calls you are getting to your adviser. Keep in regular touch with your debt adviser and check to ensure that he or she is passing on the monies you have paid to your creditors in accordance with your repayment plan.

There are many debt repayment options available and if you want to get information about them you should get your hands on The Insolvency Service's publication 'In Debt? Dealing with your Creditors'. It explains each of the repayment options in detail and is particularly suited to residents of England and Wales. It is also useful for residents of Northern Ireland where the insolvency laws and associated procedures differ slightly from those applicable to England and Wales. Residents of Scotland should read 'Debt Advice and Information Package' which is also available from The Insolvency Service. These publications can also be accessed on line at The Insolvency Service website.




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