8TH MARCH 2010
Readers please note it is a working document drawn from existing Financial Regulator codes and The Office of Fair Trading (OFT) UK guidelines for debt managers. It includes some personal suggestions designed to enhance consumer protection. It is intended to inform discussion on the appropriate consumer protection framework for the commercial debt management sector.


Preventing Consumer Harm – Regulating Commercial Debt Managers
Concerned that unregulated commercial debt managers pose a high risk of harming consumers, I have written this document as a combined Guidance and Code of Business Conduct, which I hope may prove of use to the expert group on consumer indebtedness and others concerned that consumers are protected from harm. I have done so in a personal capacity as a consumerist. Commercial debt managers are a relatively recent phenomenon and represent a new sector in the consumer financial services marketplace in Ireland. In the UK, debt managers have existed since the late 90’s. Consequently UK experience is instructive in understanding how commercial debt management will evolve here. Unregulated firms operating in competitive markets are known to engage in practices that are harmful to the consumer. This has been the consumer experience of the debt management sector in the UK. The sector is coming under increasing scrutiny as consumer complaints rise and Office of Fair Trading (OFT) compliance enforcement intervention increases. The OFT licenses and monitors debt managers fitness as high risk consumer credit operations. Responding to public concern the UK Government is currently considering regulating debt managers. Similar to UK experience, there is a high risk that consumers in Ireland will be exposed to harmful practices such as abusive marketing, predatory sales techniques and misleading claims. Indeed there is evidence that some harmful practices are already a feature within this rapidly growing sector. Debt manager’s core product is a debt management plan, through which on behalf of indebted consumers they negotiate for reduced payments with their creditors. The consumer makes one payment to the debt manager who disburses this to the creditors. Fees are charged typically to the consumer and comprise an initial upfront fee and ongoing administration fee/charge. Various types of charges exist, the most controversial being a charge based on a percentage of the amount the debtor agrees to pay. While debt managers act for their customers in some cases the business model takes on aspects of debt collection. For example when creditors pay debt managers a fee based on the amount paid to them in certain models. A question arises as to whether or not debt management plans are a financial product or service. I am of the opinion that they are financial products and services. A debt manager acts on behalf of the consumer and intermediates between a consumer and creditor, frequently a regulated credit institution or regulated credit provider. They market, sell and charge for a distinct product – the debt management plan- which involves the provision of financial planning advice, recommendation of suitability, provision of negotiation services and the collection of and payment of monies through client accounts. This draft draws on the Financial Regulator’s consumer protection and moneylender codes and also reflects elements of OFT guidance. Properly implemented it would both protect consumers and provide for a regulatory framework to underpin what may be a timely development in debt management services to indebted consumers.

Bill Hobbs LeaderSense Business Consulting March 2010


FOREWORD...................................................................................................................2 PURPOSE OF THIS CODE ............................................................................................4 LICENSING AND AUTHORISATION PROCEDURES....................................................4 REASON FOR THIS CODE ............................................................................................4 AIMS OF THIS CODE.....................................................................................................5 KEY INFLUENCES .........................................................................................................7 WHAT IS A DEBT MANAGEMENT COMPANY (DMC)? .............................................7 CONCERNS OVER DMC’s .........................................................................................8 CONCERNS OVER CREDITORS ...............................................................................9 MANDATORY OR VOLUNTARY CODE OF CONDUCT?...........................................9 DMC’s AS FINANCIAL SERVICE PROVIDERS ........................................................10 DMC SERVICES COVERED UNDER THIS CODE ...................................................11 DEFINITIONS ...........................................................................................................12 GENERAL PRINCIPLES ..............................................................................................15 COMMON RULES FOR DEBT MANAGERS................................................................16 GENERAL .................................................................................................................16 1. PROVISION OF INFORMATION TO THE CONSUMER....................................16 2. PRESERVATION OF A CONSUMER’S RIGHTS ..............................................20 3. CONTRACT TERMS .........................................................................................20 4. HANDLING MONEY ..........................................................................................21 5. OTHER TERMS ................................................................................................22 6. KNOWING THE CONSUMER ...........................................................................23 7. SUITABILITY .....................................................................................................23 8. FINANCIAL POSITION......................................................................................23 9. PAYMENTS TO CREDITORS ...........................................................................24 10. REASONS WHY STATEMENT .....................................................................24 11. OTHER POINTS............................................................................................25 12. DEBT MANAGEMENT PLAN ADMINISTRATION .........................................25 13. UNSOLICITED CONTACT (COLDCALLING) ................................................26 14. DISCLOSURE REQUIREMENTS ..................................................................27 15. FEES AND CHARGES ..................................................................................29 16. HANDLING COMPLAINTS ............................................................................30 17. CONSUMER RECORDS ...............................................................................31 18. FEES, COMMISSIONS AND OTHER REWARDS .........................................32 19. DMC AGENTS...............................................................................................32 20. MINIMUM COMPETENCY REQUIREMENTS ...............................................33 21. FIT AND PROPER.........................................................................................33 22. ADVERTISING GENERAL REQUIREMENTS ...............................................34 23. DMC ACTING AS AN AGENT FOR THE CONSUMER DEBTOR..................35 24. REFERAL TO DMC’s.....................................................................................35 25. COMPLIANCE WITH THIS CODE.................................................................36


The purpose of this code is to help consumers make informed financial decisions in a safe and fair market and to foster a sound dynamic commercial debt advice and debt management sector in Ireland. This is done by helping consumers to make informed choices through the provision of information to educate them and through developing and enforcing codes of conduct/practice, which seek to ensure that commercial debt management, debt counseling and debt advisory service providers act in a fair and transparent way.

A Consumer Protection Code for Debt Managers will apply to all debt managers licensed or regulated under the Consumer Credit Act or any other Act once enabling legislation had been passed. In the interim this code is being published by the National Consumer Agency under section 90 of the Consumer Protection Act 2007 as a matter of consumer protection. Administration and compliance with the code will be undertaken by the CBFSAI in accordance with section 94 of the Act. Please refer to the Definitions section for any term shown in bold and italics throughout the text of the Code. This code does not apply to the Money Advisory Budgeting Service, Citizens Advice Bureau or Free Legal Aid Centres. Note: It should be possible for commercial debt managers to “voluntarily” commit to comply with the code. In this scenario a list of those who have signed up to the code could be published on the Financial Regulators website and or NCA website and advertised to the public. In turn DMC’s should undertake to declare their status using some agreed form of disclosure. The IBF and its members could agree deal with Commercial Debt Managers who have signed up for the code. See Rules section 23.

Advice to consumers about debt problems has for many years been provided by the Money Advice and Budgeting Service (MABS), the Citizens Advice Bureau and Free Legal Aid Centres. Since 2008, fee charging commercial debt management companies (DMC’s) have entered the market. Consumers, consumer bodies, credit institutions and others have raised concerns about DMC’s and marketplace behaviors. They point to problems

emerging here similar to problems experienced in the UK where DMC’s have operated for some time. It is clear that certain unwelcome practices have emerged here in particular • • • • • • false and misleading claims, opacity ambiguous or hidden pricing and fee models predatory selling deceptive online marketing marketing of “free advice”

DMC’s generate revenue from charging consumers for setting up and administering plans. In some cases creditors may pay a fee or charge to the DMC which is in turn charged to their customers account. The DMC business model here is similar in almost all respects to those operating in the UK for the past decade or so. DMC’s in the UK and Northern Ireland are licensed by the Office of Fair Trading (OFT) under the UK Consumer Credit Act and required to comply with OFT guidance. The OFT considers 1DMC to be a high risk consumer credit sector. The UK experience is instructive as some DMC’s operating here are UK companies that are operating cross border, have established operations here or are in alliance with local partners. It’s notable that having first issued guidelines for DMC’s in 2001 and updating them in 2008 the 2OFT, instancing concerns over the level compliance interventions and continuing harmful practices, is engaged in a review of the sector. Responding to heightened public concern about debt management practices, the UK Government is considering regulating the sector. It is timely then to consider a code of conduct for commercial debt managers offering their services in Ireland.


The number of UK DMC’s is somewhere between 150 (OFT) and 800 (Moneysupermarket.com). The largest operations service c80% of customers. Companies range in size from large operations to small “one man in a garage” operations. Some have multiple online shop fronts and some masquerade as charities, non-for profit and governmental type agencies.
2 The OFT issued debt management guidance (the guidance) in December 2001 (updated September 2008 to reflect the reforms


introduced by the UK Consumer Credit Act 2006). The guidance sets out minimum standards for debt management businesses that provide debt advice (including free to client) and/or seek to re-schedule customers' repayment of debt and charge for doing so. Key principles relate to the transparency of advertising and promotion of a debt management businesses' services, fees charged to consumers, acting in the best interests of the consumer and keeping the consumer informed. Applicants and license holders are expected to abide by the guidance.

The purpose of the code is to set out minimum standards to be met by DMC’s. The code doesn’t, however, set out a comprehensive checklist and not all of its elements will apply to some DMC’s. It is not exhaustive and conduct or omissions not included in the code may be taken into account in determining compliance with its general principles. DMC’s are expected to abide by the spirit as well as the letter of the code. Some of the practices highlighted in the code are clearly unfair or improper, for example, lack of transparency about the services to be provided. In those cases DMC’s should have been aware even before the issue of this code of the risk of action if they engaged in such practices or allowed their employees, agents, or associates to do so. In other cases the position might have been less clear, and the code is intended to be helpful in outlining the kinds of business practice to which the 3FR/NCA is likely to object The key requirements of the code are: • Advertisements and marketing must be accurate, clear and not misleading. Any reference to 'savings' on repayments must make it equally clear that debt rescheduling will usually lead to an increase in the size of the sum to be repaid, the period of repayment and may potentially affect the consumer's credit record No claims of being able to guarantee debt forgiveness or freezing of interest. Such claims are not within the competence of a DMC to deliver on. No cold calling by personal visit or misleading or unlawful cold calling by telephone or sending of unsolicited emails Consumers must be given adequate information before entering into an agreement. Contracts should specify the nature of the services provided, total cost to the consumer, amount to be repaid and duration of the contract. Contract terms should be fair, legible and in plain language A realistic assessment of the customer's financial circumstances must be made before advice is given, including verification of income and regular outgoings. Any advice must be given in the best interests of consumers. Where a debt management plan is recommended DMC’s must demonstrate suitability. This is especially important as the suitability of a debt management plan is determined by the consumers’ financial circumstances. DMC’s must inform clients of the outcome of negotiations with creditors, as well as any developments with creditors such as the issue of default notices or the threat of legal action



• Payments from consumers should normally be passed on to creditors within five working days of receipt of cleared funds.

Principles set out the broad expectations as to how DMC’s should interact with their customers. These principles should be reflected in all aspects of a DMC’s business dealings with consumers. The Code comprises general principles and more detailed rules designed to enhance understanding of and compliance with those general principles. In all circumstances, the overriding obligation on DMC’s is to adhere to the letter and spirit of the general principles. The Code comprises the same provisions, where feasible and practicable, that apply to other sectors of the financial services industry, whilst endeavoring to take account of the nature of debt management business. It also contains some provisions that are specific to debt managers because of the nature of that business. Drawing up the code has been guided by the Government’s six core principles for better regulation i.e. necessity, effectiveness, proportionality, transparency, accountability and consistency.

A DMC offers a service to individuals in debt for a payment. They provide advice to the consumer and negotiate with creditors on their behalf to set up a payment plan for the individual that may involve a reduction in monthly payments and a freeze on interest charges. The individual consumer makes one payment to the DMC, which is then distributed to each creditor. The core product is called a debt management agreement which is the service individuals pay for. They may offer services such as debt consolidation, arranging mortgages and or consumer credit products and act as insurance intermediaries. Where they do so they are required to comply with the Financial Regulators’ authorisation procedures and comply with its prudential regulations, codes of business conduct, fitness & probity and minimum competency requirements. Some DMC’s charge a percentage of the monthly payments as a fee. Some charge a fee to establish a debt management plan and scaled charge related to the number of creditor payments per month. Others charge a percentage of the monthly saving. In addition, the entire first month's payment may be kept as a deposit or a charge for setting up the payment plan. Some DMC’s offer a refund of the first payment when the individual has paid off their debt on the payment plan. Fees are usually taken from the monthly payment, before payments are distributed to creditors.


While there is no objection to DMC’s 4charging for, or consumers choosing to pay for, debt management services, the consumers using these services will, however, often be vulnerable because of the nature of their financial problems and, almost by definition, have the least available financial resources. It is therefore, particularly important that the services provided by DMC’s are carried out with due care, skill and fairness. The practice of basing charges on a percentage of the payment made by a debtor or paid to creditors is considered inimical to consumer interests. Consequently the permitted charging structure set out in this code allows for an initial plan set up fee and an administration charge based on the number of creditor payments to debtor accounts which may be set on tiered basis. The practice of charging for negotiating a lump sum early settlement with creditor(s) is based on a percentage fee charged on either the lump sum payment or amount written off. This practice is inimical to consumer interests. The code will establish a maximum chargeable fee in either case. There are two generic models one in which the consumer pays the DMC the second where the creditor pays the DMC with charges for the consumer debtor account. Some DMC business models include elements of debt collection processes principally the monitoring of payments, reporting on these to creditors and undertaking reviews at creditor’s request. This code will apply equally to DMC’s who provide advice and a similar range of negotiation and payment services for no direct charge to the consumer.

A number of concerns have been raised by consumers, consumer agencies, lenders and others as follows: • In the absence of licensing, guidance and regulations there is a high risk of abusive marketing practices and predatory selling which are known aspects of unregulated markets for consumer financial products and services. Certain DMC’s were operating cross border online business models some of which are 5ambiguous and non-transparent. Some DMC’s may claim to be not-for profit and/or charitable concerns. Differing models some of which are marketed as free to the consumer are in fact not 6free.

• •

4 Consider regulating for fees and charges structures – there are many variations ranging from debtor pay to credit pay models.

Transparency is critical. 5 Some DMC’s are UK based operations with a thin online Irish content font page. Some offer IVA’s and other products unavailable here. Others appear to different companies but are fronts for one company. 6 Free advice is marketed as a sales generation tactic

• • • • • Advertising can be misleading Transparency over the nature and cost of the services provided the quality of advice and information given to the consumer The handling of client money. Websites purporting to be a DMC when in fact they are lead gathering agents to any number of DMC’s Websites where the DMC is not identifiable and contains no reference to recognisable debt management companies.

Some creditors have a blanket policy of refusing to enter into negotiations with DMC’s, or refusing to accept payments sent by DMC’s on behalf of consumers. Where a consumer appoints a representative to negotiate on their behalf it is an unfair and improper business practice on the part of the creditor to operate a policy, without reason, of refusing to consider such requests. It is expected that where a creditor agrees to accept lower payments that debt collection activity will be suspended by it. It would be unfair consumer practice to agree to accept a lower payment and continue to pursue a debtor for the balance. It is the intention to ensure that creditors agree to accept payments from a DMC subject to some criteria. This is not a matter for this code but will be dealt with separately.

Some DMC’s or a trade body may propose a voluntary code of conduct. However the sector is considered to be a high risk consumer protection area of concern and for this reason a mandatory consumer protection code is identified as a priority. A DMC when operating as a mortgage broker or insurance intermediary is required to comply with authorisation requirements, codes of conduct, minimum competency and fitness and probity regimes. In the case where a DMC has appointed agents, licensed third parties or otherwise accepts applications from others who call on potential customers, the code where applicable applies to these agents or third parties.


The provision by DMC’s of debt advice to a consumer and recommendation of the suitability of debt management plans or other options is considered a financial advisory service. Debt management plans and their administration are considered a consumer financial product and service. Existing regulatory codes where applicable will apply to DMC’s in particular the fitness and probity, minimum competency requirements, consumer protection code and requirements concerning the appointment of agents or third parties to provide advice on its products and services and to arrange for debt management plans or other associated products or services.


DMC services covered under this code of conduct consist of the following services when provided to debtors who are individuals defined as consumers: • Advising on how to restructure debts, how to alter debt repayments or how to achieve early resettlement of debts. Contacting creditors and/or negotiating with creditors, on behalf of the consumer debtor, in order to have any of the above arrangements (whether that conduct amounts to “negotiation” or not) Providing a facility for the debtor to make a single repayment which is then distributed on his/her behalf to his/her creditors

In addition, if and when credit reference services are provided: • undertaking reviews of the consumer debtors' financial circumstances and/or making payments on their behalf, including ascertaining whether a credit information agency holds information relevant to the financial standing of the debtor ascertaining the contents of such information so held advising consumers on how they might take steps to secure the correction of, the omission of anything from, or the making of any other kind of modification to, information relevant to their financial standing advising consumers on how they might take steps to secure that an agency which holds such information about them stops holding it or does not provide it to another person taking steps on behalf of a consumer with a view to securing the correction of, the omission of anything from, or the making of any other kind of modification to, information relevant to the financial standing of that individual

• •

and • taking steps on behalf of a consumer to secure that an agency which holds such information stops holding it or does not provide it to another person.

Where any DMC gives assistance, on a non commercial basis, in one or more of the ways outlined above to consumers in debt, it will be expected to meet relevant parts of the minimum standards set out in the guidance. Elements of the code and its guidance are relevant where they set out the principles or deal with actions or circumstances that are a feature of the relationship between the DMC and the consumer.


In this Code: “advertisement” means any commercial communication usually paid for by a debt manager, which is addressed to the consumer public or a section of it, the purpose being to advertise a product, service “advertised product or service” means the product or service that is the subject of an advertisement; “agent” a person or company that markets, advises and arranges for debt management plans on behalf of a debt manager or debt management company “associated undertaking” means an associated undertaking within the meaning of Regulation 34 of the European Communities (Companies Group Accounts) Regulations 1992; “business day” means any day except Saturday, Sunday, bank holidays and public holidays; “certified person” has the meaning assigned to it by section 55 of the Investment Intermediaries Act, 1995; “charge” means any cost or fee which a consumer must pay in connection with a product or service provided by a debt manager; “complaint” refers to an expression of grievance or dissatisfaction by a consumer, either verbally or in writing, in connection with: a) the provision of a product or service to a consumer by a debt manager or b) the failure of a debt manager to provide a product or service to a consumer; “connected party” shall, except where otherwise stated, include a partner, officer, controller, associated undertaking, related undertaking or subsidiary undertaking, employee or person authorised to engage in the business of debt management on behalf of a DMC including any associate of the person concerned; “consumer” means any of the following: a) a natural person acting outside their business, trade or profession; b) a person or group of persons, but not an incorporated body with an annual turnover in excess of €3million (for the avoidance of doubt a group of persons includes partnerships and other unincorporated bodies such as clubs, charities and trusts, not consisting entirely of bodies corporate); c) incorporated bodies having an annual turnover of €3 million or less in the previous financial year (provided that such body shall not be a member of a

group of companies having a combined turnover greater than the said €3 million); or d) a member of a credit union; and includes where appropriate, a potential ‘consumer’ (within the meaning above); “customer” or “client” means any person to whom a DMC provides or offers to provide a service the subject of this Code, and any person who requests such a service; “client account” the account into which consumer debtors make a regular payment and from which regular payments are made to their creditors; “debt management company” a company providing debt management services as defined in the code; “debt manager” a person or company providing debt management products and services; “DMC” a commercial debt management company or debt manager; “debt management plan” a voluntary agreement between a consumer debtor and debt manager in which; the debt manager negotiates a payment schedule with the debtors creditors; and collects and administers regular payments from the debtor which it disburses to the debtors creditors; “debt management programme” the same meaning as a “debt management plan” “employee” means a person employed under a contract of service or a person otherwise employed by a DMC; “group” includes a company, its parent and its subsidiaries and any associated undertaking or related undertakings; “officer” in relation to a DMC, means a director, chief executive, manager or secretary, by whatever name called; “online activity” means the advertising of and offer of services to consumers via the internet. It also includes lead generation or online response forms. “outsourced activity” is where a DMC employs another person (other than a natural person who is an employee of the DMC under a contract of service) to carry out an activity on its behalf; “person” means a natural person or a legal person; “record” means any document, file or information (whether stored electronically or otherwise) and which is capable of being reproduced in a legible form; “related undertaking” means:

a) companies related within the meaning of section 140(5) of the Companies Act 1990; b) undertakings where the business of those undertakings has been so carried on that the separate business of each undertaking, or substantial part thereof, is not readily identifiable; or c) undertakings where the decision as to how and by whom each shall be managed can be made either by the same person or by the same group of persons acting in concert.


A debt management company must ensure that in all its dealings with customers and (within the context of any future authorisation/licence procedures), it: 1. acts honestly, fairly and professionally in the best interests of its customers and the integrity of the market; 2. acts with due skill, care and diligence in the best interests of its customers; 3. does not recklessly, negligently or deliberately mislead a customer as to the real or perceived advantages or disadvantages of any product or service; 4. has and employs effectively the resources and procedures, systems and control checks that are necessary for compliance with this Code; 5. seeks from its customers information relevant to the product or service requested; 6. makes full disclosure of all relevant material information, including all charges, in a way that seeks to inform the customer; 7. seeks to avoid conflicts of interest; 8. corrects errors and handles complaints speedily, efficiently and fairly; 9. does not exert undue pressure or undue influence on a customer; 10. ensures that any outsourced activity complies with the requirements of this Code; 11. without prejudice to the pursuit of its legitimate commercial aims, does not, through its policies, procedures, or working practices, prevent access to basic services such as those provided for by MABS; and 12. complies with the letter and spirit of this Code.


A debt manager must ensure that all warnings required by this Code are prominent, i.e. they must be in a box, in bold type and of a font size that is larger than the normal font size used throughout the document or advertisement.

A Debt Manager must: ensure that the name of a product or service which it provides is not misleading in terms of the benefits that the product or service can deliver. not make the sale of a product or service contingent on the consumer purchasing another product or service from the DMC. not charge a consumer a fee for any optional extra(s) offered in conjunction with a product or service, unless that consumer has positively indicated that they wish to purchase the optional extra(s). must ensure that all warnings required by this Code are prominent, i.e. they must be in a box, in bold type and of a font size that is larger than the normal font size used throughout the document or advertisement. assist a consumer in understanding the product provided, including all related payments and charges. Consumers must be provided with adequate information about the service and the consequences and costs of entering into an agreement. prior to entering into an agreement with a consumer, disclose all the fees and costs in a clear manner and prominently indicate the cost nature of the service in all documentation. provide information as to the nature of the service that is being offered; the total cost to the consumer of the service including any initial or fixed charge fee or deposit, the periodic management fee to be paid to the DMC multiplied by the estimated length of the contract; the amount to be repaid; and the likely duration of the contract must be clearly explained at the outset.

where it is not possible to establish at the pre-contract stage the cost or duration of the contract, the consumer must be given a realistic estimate of cost and the duration of the contract. This should be accompanied in close proximity by a clear warning that it is an estimate. The assumptions on which the estimate is based should be set out. If during the pre-contractual stage it becomes clear that

the estimate does not adequately reflect the consumer's circumstances, a revised estimate must be given. where an initial up front fee, part payment of an up front fee or deposit is payable, the consumer must be given a clear explanation of: • • • • • what aspect of the service is covered by the fee or (as the case may be) what the deposit is held for the manner on which it is calculated the manner in which the balance of the up front fee is payable i.e. over three months the effect this part payment schedule will have on payments made to creditors during the part payment period whether it is refundable, with due regard to the principles of contract law in relation to deposits and part payments

must advise the consumer that they will be given the opportunity to withdraw from the contract, the procedures for withdrawal the circumstances in which costs will and will not be incurred and, if they are, what they are likely to be. provide the opportunity for the consumer to withdraw from the contract, if when he/she is informed of the of the total cost of service, he/she decides the service is unsuitable must warn the consumer in writing: where the first payment goes to the DMC and not to the creditors (whether as an initial up front fee, part payment of an up front fee, as a deposit or for some other reason) that they will miss a payment or payments or their payments will be reduced to their creditors and will therefore go into arrears or further into arrears This warning must appear prominently on either on debt management plan agreements •

Warnings should be developed for each section

that creditors are not obliged to accept reduced repayments to freeze interest and charges and that, unless they do, repaying the same debt over a longer period of time will lead to an increase in the total amount to be paid that collection actions, including default notices and litigation, can ensue and that there is no guarantee that any existing or threatened proceedings will be suspended or withdrawn. The possibility of default notices – including that they may incur costs that are added to the debt – must be made clear. of the likely impact of the debt management programme on the consumers credit rating. In particular it should be stated that they might not be able to obtain credit in the short term and that there is some likelihood that they will not be able to do so in the medium to long term either. Consumers must not be misled into thinking

that their credit rating will improve earlier than when the payment of their debt is completed, or even immediately thereafter; records are retained by credit reference agencies for a further six years. • of the importance of meeting debts such as mortgage, rent, utility and certain insurance payments. in particular there must be a consumer warning that their home is at risk if they do not keep up repayments or clear arrears not to ignore correspondence or other contact from creditors or those acting on behalf of creditors

advise the consumer of the nature of those commitments that will, and especially importantly those that as a matter of the DMC's own decision, will not be included within the repayment plan, must be made clear to potential clients. The DMC must exercise all due care to ensure that debts that it says it cannot deal with are not included in programmes by mistake. where a DMC is aware that a particular creditor refuses to deal with it, (for whatever reason and whether or not the DMC regards this refusal as justified), the consumer must be told of this as soon as the DMC is aware that the consumer has an account with that creditor. where consumers make payments by way of standing order or direct debit, issue monthly statements to consumers who pay weekly and quarterly statements to consumers who pay monthly. give adequate notice to affected customers by registered post or by hand, where it proposes to withdraw its services. A debt manager must ensure that any outstanding business is properly completed. inform consumers of the amount and order in which payments will be allocated to different creditors outstanding balances ensure that, where it intends to record a telephone conversation with a consumer, it informs the consumer, at the outset of the conversation, that it is being recorded. ensure that, where it communicates with a consumer using electronic media it has in place appropriate arrangements to ensure that secure transmission of information to, and receipt of information from, the consumer. ensure that all printed information it provides to consumers is clear, plain language, be a print size that is clearly legible and must state clearly the implications of entering a debt management agreement. where contact is made with a potential client after a referral from a credit or mortgage broker or lender, the debt manager must disclose at the outset of the conversation how they obtained the consumers details, what service they offer and that they cannot themselves provide a loan.

where a debt manager remunerates third parties for providing referrals or referring consumers to it, it must disclose this to the consumer and set out the terms and amount of any referral fee paid for the introduction or any fee that may be charged to an account with the referring party. where a debt manager operates by means of any distance communications it must comply with the requirements of the xxx to provide amongst other things certain information to the consumer before the contract is concluded. where a debt manager recommends that, one of the consumers options is a remortgage, or further advance, or consolidation loan, the DMC must disclose to the customer in writing the level of remuneration they will receive from the third party who arranges this service, if not already disclosed by the third party.


A debt manager must not, in any communication or agreement with a consumer (except where permitted by applicable legislation), exclude or restrict, or seek to exclude or restrict: a) any legal liability or duty of care to a consumer which it has under applicable law or under this Code; b) any other duty to act with skill, care and diligence which is owed to a consumer in connection with the provision to that consumer of financial services; or c) any liability owed to a consumer for failure to exercise the degree of skill, care and diligence that may reasonably be expected of it in the provision of a financial service.

A specimen 7consumer information sheet is attached in appendix X in a form acceptable. DMC’s should not materially depart from its form and structure. In particular the consumer health warnings must remain prominently displayed in the relevant sections. Contract terms and conditions should be fair, written in plain, intelligible language and easily legible. The contract should set out the : • nature of the services that are being supplied (including the kinds of debt that will and will not be covered) total cost to the consumer of the service, including any initial or fixed charge fee or deposit and the periodic management fee to be paid to the DMC multiplied by the estimated length of the contract the amount to be repaid and, the duration of the contract.

• •


To be developed

Where it is not possible to state firmly the cost or duration of the contract, the contract must include realistic estimates of cost and the duration of the contract. This should be accompanied in close proximity by a clear warning that it is an estimate. The assumptions on which the estimate is based should be set out.

The contract should set out the circumstances in which the consumer may withdraw and receive a refund of any monies paid to the DMC
Under the Distance Selling Regulations where a consumer enters into a contract before he has received any written information, he/she has both • a cooling-off period of at least seven working days during which he/she can withdraw from the contract with a full refund and, • a right to be informed that he/she has that cooling off period The contract must not include any term which says or implies that there are no circumstances in which a client is entitled to refund. For example a refund (and in some cases a full refund) may be due to a dissatisfied client if: • the DMC has promised more than it can deliver. This may be the case even where the DMC's contract is appropriately worded, if (for example) its written or oral marketing is over-optimistic or the DMC has failed to conduct negotiations with the reasonable care and skill required by section x of the Supply of Goods and Services Act or there has been a total failure of consideration.

The contract should allow the client to withdraw from the contract where, following signing of the contract the total fee differs significantly from the estimate given prior to the contract (for example, because a full investigation of the customers’ circumstances reveals that the monthly payment must be larger than first thought). Include section on 8standard cooling off period-

Any monies held on behalf of consumers must be kept in a client account not usable by the DMC for the purposes of its own business. This includes, in particular, any deposit which under the contract may be returned to the client at any date in the future and any monies received by the company for payment to creditors. Any interest earned on this account should accrue to the benefit of the client, not the company.

8 It the practice to allow for a 14 day cooling of period, during which the consumer may terminate the agreement. However as work may have commenced on processing their plan and DMC’s refund the initial fee less their reasonable costs. This issue has proved contentious with some DMC’s retaining the full initial payments.

The company must ensure that it holds indemnity/fidelity insurance against fraud of theft of customers money at a minimum of 9(x) times the monthly turnover. The contract must specify a period within which payments received from the customer will normally be passed on which must not be greater than five working days. Delay that adversely affects the individual consumer's financial position and which exceeds five working days from receipt of cleared funds is unacceptable. If the DMC fails to disburse payments to creditors in accordance with the contract, it should accept responsibility and inform the customer of the delay, together with the reason for it. The law does not impose liability where the reason for delay is beyond the control of the supplier. But where the delay is not beyond its control the DMC should take appropriate action to put the consumer in the position they would have been had the contract been fulfilled. This includes, for example making good any additional interest which has accrued and any default charges that have been applied to the account as a result of the delay. In this respect, the DMC must have appropriate systems in place to deal with foreseeable problems and to minimise delays, even when the initial cause is not its fault. As the consumer relies on the DMC to be made aware of any delay, DMC’s should take reasonable steps to anticipate delays and make good losses. A DMC must not accept consumers monies before they have received and acknowledged in writing the Terms and Conditions of the DMC. DMC’s must demonstrate, by annual audit certificates from an independent external auditor, that customers funds are held in a separate client bank account that would not be at risk in the event of a DMC ceasing to trade, and is not usable by the DMC for the purposes of its own business. Any interest earned on the account should accrue to the benefit of the client and not the DMC. If customers withdraw from debt management programmes, DMC’s must refund any monies held, excluding any reasonable administration fees due.

Contracts must not prohibit consumers from corresponding with, or responding to written or oral communications from creditors or others acting on behalf of creditors. However, in order to avoid duplicate or contradictory action, contracts may reasonably require the customer to send to the DMC a copy of any communication from a creditor. Where the contract requires or suggests that the customer should send such correspondence to the DMC, it must deal with it appropriately and promptly.


To be developed

The DMC must send to the customer a copy of any written communication it sends to or receives from the creditor, and (unless the creditor itself sends a copy to the customer) must keep the customer informed of other communications. Contracts must not include declarations such as 'I fully understand the requirements of the contract' or confirmation that certain provisions have been explained.

All advice given should be in the best interests of the consumer. Debt management programmes are not suitable for all consumer debtors, and DMC’s must exercise all due discretion, in the best interests of the consumer, in deciding whether or not take a consumer as a customer.

A DMC must exercise all due discretion, in the best interests of the consumer , in deciding whether or not to accept a consumer on to a debt management programme, and must bear in mind that debt management programmes are not suitable for all consumers. A realistic assessment of the financial circumstances of the customer must be made A DMC must ensure that, having regard to the facts disclosed by the consumer and other relevant facts about that consumer of which the DMC is aware, any product or service offered to a consumer is suitable to that consumer.

Before providing a product or service to a consumer, a DMC must gather and record sufficient information from the consumer to enable it to provide a recommendation or a product or service appropriate to that consumer. The level of information gathered should be appropriate to the nature and complexity of the product or service being sought by the consumer, but must be to a level that allows the DMC to provide a professional service. A realistic assessment of the financial circumstances of the consumer, including both income and outgoings, must be made before advice is given. Consumer income must be verified by appropriate means, such as pay slips and copies retained on file Reasonable steps must also be taken to verify regular outgoings. Estimates of expenditure on certain items are permitted, but only if precise figures are not available. Standard expenditure guidelines may be used where there is no better indication of the client's outgoings provided that there is nothing to suggest that they are inappropriate. A copy of any financial statement sent to creditors must also be sent to the client.


Any advice given to the client to cancel direct debits or standing orders prior to the repayment plan being agreed with creditors must be demonstrably in the best interests of the client. It is not a step which should be undertaken lightly. DMC's must clearly warn clients of the risks and consequences of this course of action if they advise it. Where this course is taken, it is normally expected that regular payments to creditors (even if lower than the contractual ones) should continue to be made wherever possible. The difficulties associated with stopping contractual payments are especially acute when they are accompanied by a period in which no payments at all are made (for example, because the DMC takes the first payment under the plan as a deposit or up front fee or because there is a delay in distributing payments to creditors). If this will, or is likely to, happen under the plan the consumer must be clearly informed and warned of the consequences. It is not sufficient for this purpose that there be a statement to this effect in the small print of the terms and conditions. Customers should not be advised to make payments to accounts at a rate lower than the rate at which any interest and other charges are accruing or may accrue, unless this is demonstrably in their best interests. In such a case, a clear explanation must be given to the client as to why this course is necessary and its implications. If, following advice to cancel direct debits or reduce the level of contractual payments, it becomes clear that the course of action is not producing results in the customer’s interest, (for example, because creditors are not agreeing to freeze interest), then the customer must be informed immediately so that he/she may be advised appropriately and take whatever action is in his best interests (including the possibility of withdrawing from the plan). Customers must be advised of the importance of meeting debts such as mortgages, rent and utility payments. More generally it should not be assumed that it is always in the customers’ best interests simply to divide available income between debts in proportion to their size. For example advice should take into account the fact that some loans may lose the benefit of a reduced rate of interest if payments are missed, or that there may be a benefit in settling a loan with a higher rate of interest sooner than one with a lower rate of interest.



Before providing a product or service to a consumer, a DMC must prepare a written statement setting out: a) the reasons why a product or service offered to a consumer is considered to be suitable to that consumer; b) the reasons why each of a selection of product options offered to a consumer are considered to be suitable to that consumer; or

c) the reasons why a recommended product is considered to be the most suitable product for that consumer. The DMC must give a copy of this written statement to the consumer and retain a copy.



Customers must be advised not to ignore correspondence or other contact from creditors or those acting on behalf of creditors. Customers should not be advised to close or switch their main banking account unless there is a compelling reason for doing so. The consequences of switching provider should be fully explained. A debt manager should not offer to or arrange to switch bank accounts. A DMC must gather and record details of any material changes to a consumer’s circumstances before providing that consumer with a subsequent product or service. A DMC must ensure that, where a consumer refuses to provide information sought in compliance with this Code, the refusal is noted on that consumer’s records. A DMC must maintain a list of its customers who are consumers and the subject of this Code. A DMC must endeavor to have the consumer certify the accuracy of the information he/she has provided to the DMC Where the consumer declines to do so, the DMC must note this on the consumer’s records.



DMC’s must inform the consumer of the outcome of negotiations with creditors. This is not limited to the situation when creditors have refused to deal with the DMC, or refused to freeze interest. But it is especially important in those cases. Customers must be kept informed of any developments in the relationship with creditors, in particular the issue of default notices or the threat of issue of legal proceedings Where the service provided by the DMC includes debt repayment, the DMC must

take full account of debts such as mortgage payments, rent, utility payments etc including any arrears already incurred on those debts, in setting monthly repayments, and reassess the payment plan and consider any necessary changes (including bringing the plan to an end) to ensure it remains in the consumer’s best interests, as soon as it becomes aware of material change in the consumer’s financial position. The customer should be advised of any recommended

changes without delay. Repayment plans should in any event be re-assessed on at least an annual basis and the client informed of the outcome of the reassessment.
• Customers should at the outset be given a statement of how their money is being disbursed. In addition, where a plan has been agreed, the balance owed (or if an accurate figure is not known the best estimate), the period of payment needed to clear the debts and the fee charged by the DMC must be included in the statement. Customers must be kept informed of any material changes to these arrangements at the time they occur. DMC's should meet any reasonable request by a client for a statement of his or her position.

All correspondence, statements and other paperwork sent to or received from the customer or the customer’s creditors and which has not already been copied to or returned to the client, should be retained by the DMC until such time as the contract is completed or terminated. On termination or completion of the contract, all retained paperwork should be returned to the customer unless, at that time, the customer says that they do not want the paperwork.



When contacting a consumer other than an existing customer, a DMC may make an unsolicited contact to a consumer, who is an individual, by way of a personal visit or telephone call, only if: a) the consumer has signed a statement, within the previous 6 months, giving the debt manager permission to make personal visits or telephone calls to him/her; or b) the consumer has a listing in the business listing section of the current telephone directory, classified telephone directory or in trade/professional directories circulating in the State; or c) the consumer is a director of a company, or a partner in a firm with an entry in one of the directories listed in b) above; or d) the consumer is the subject of a referral, received from an entity authorised to provide financial services in Ireland, another entity within the same group, a solicitor, a certified person or an existing customer. In relation to d) above, such a referral must be followed up by an indication to the consumer by the DMC that the referral has been made and asking for consent to proceed. A DMC must ensure that, where it makes an unsolicited contact on foot of a referral, it retains a record of the referral.

An unsolicited contact made to a consumer, other than an existing customer, may only be made between 9.00 a.m. and 9.00 p.m. Monday to Saturday (excluding bank holidays), unless otherwise requested by the consumer. When making an unsolicited contact in accordance with this Code, the representative of a DMC must immediately and in the following order: a) identify himself or herself by name, the name of the DMC on whose behalf he/she is calling and the commercial purpose of the contact; b) inform the consumer that the call is being recorded, if this is the case; c) disclose to the consumer, the source of the business lead or referral supporting the contact; and d) establish if the consumer wishes the call to proceed; if not, the caller must end the contact immediately. A DMC must abide by a request from a consumer not to make an unsolicited contact to him/her again. A DMC must not reach a binding agreement with a consumer on the basis of an unsolicited contact alone, except in the circumstances permitted under the European Communities (Distance Marketing of Consumer Financial Services) Regulations 2004.



A DMC must include its 10“regulatory” disclosure statement: a) on its business stationery (including DMC agreements); b) in all advertisements; c) in all catalogues, brochures etc; and d) on all electronic communications with consumers including on the home page of its website, if any. The regulatory disclosure statement must take the following form: “[Full legal name of DMC (and trading name(s), if applicable)] is required to comply with the X Code of Conduct for Debt Managers.” A DMC must not use the disclosure statement on any business stationery, advertisement, catalogue, brochure or electronic communication in connection with a product or service for which the DMC is not (regulated) by the Financial Regulator.


Requires a statement pending regulations or licensing requirements

The disclosure statement must not be presented in such a way as to appear to be an endorsement by the (Financial Regulator/NCA) of the DMC or its products or services.

A DMC must: a) speedily, efficiently and fairly, correct an error in any charge or price levied on, or quoted to, a consumer in respect of any product or service the subject of this Code; b) where it considers that there may have been a material charging or pricing error, without delay, inform the Financial Regulator of its proposals for correcting any such error as may have occurred in accordance with paragraph a) above (if any such information is provided verbally in the first instance, it must be provided to the Financial Regulator in writing on the next business day); and c) notify all affected consumers, both current and former, in a timely manner and in such form as may be agreed with the Financial Regulator, of any material charging or pricing error that impacted negatively on the cost of the service or the value of the product provided.




It is the practice of some DMC’s to assess charges based on a % of the amount to be paid to creditors. This practice is inimical to consumer’s interests as the greater the amount paid the higher the charges. The schedule for charges permitted by a DMC is a combination of: (1) An initial set fee for setting up and negotiating the plan with creditors (2) An administration fee charged on a scaled basis on the number of regular payments made to creditors It is the practice of DMC’s to charge a fee for negotiating lump sum full and final settlements. The schedule for negotiated lump sum full and final settlements is as follows: A maximum of 11(10%) of the lump sum amount or the amount agreed to be written off by the creditor(s) whichever is the lower but should be no more than (€5000)

Note: Consider providing for one model as above

11 The % and € amount might be higher/lower but the principle maximises the benefit to the consumer





A DMC must have in place a written procedure for the proper handling of complaints. This procedure need not apply where the complaint has been resolved to the complainant’s satisfaction within 5 business days, provided however, that a record of this fact is maintained. At a minimum this procedure must provide that: a) the DMC will acknowledge each complaint in writing within 5 business days of the complaint being received; b) the DMC will provide the complainant with the name of one or more individuals appointed by it to be the complainant’s point of contact in relation to the complaint until the complaint is resolved or cannot be processed any further; c) the DMC will provide the complainant with a regular written update on the progress of the investigation of the complaint at intervals of not greater than 20 business days; d) the DMC will attempt to investigate and resolve the complaint within 40 business days of having received the complaint. Where the 40 business days have elapsed and the complaint is not resolved, the DMC will inform the complainant of the anticipated timeframe within which the moneylender hopes to resolve the complaint and of the consumer’s right to refer the matter to the 12Financial Services Ombudsman and will provide the consumer with the contact details of the Financial Services Ombudsman; and e) the DMC will advise the complainant in writing, within 5 business days of the completion of the investigation of a complaint, of the outcome of the investigation and, where applicable, explain the terms of any offer or settlement being made. The DMC will also inform the complainant of the right to refer the matter to the Financial Services Ombudsman and will provide the consumer with the contact details of the Financial Services Ombudsman. When a DMC receives a verbal complaint, it must offer the consumer the opportunity to have the complaint treated as a written complaint. A DMC must maintain an up-to-date record of all complaints subject to the complaints’ procedure. This record must contain the details of each complaint, a record of the moneylender’s response(s), any other relevant correspondence or records and the action taken to resolve each complaint.


Only if DMC’s are subject to the FSO’s remit. If not then this section requires a complaints adjudication and resolution procedure




A DMC must maintain up-to-date consumer records containing at least the following: a copy of all documents required for consumer identification and profile; the consumer’s contact details; all information and documents prepared in compliance with this Code; details of products and services provided to the consumer; all correspondence with the consumer and details of any other information provided to the consumer in relation to the product or service; all documents or applications completed or signed by the consumer; copies of all original documents submitted by the consumer in support of an application for the provision of a service or product; and all other relevant information concerning the consumer. all correspondence to and from the consumers creditors Details of individual transactions must be retained for 6 years after the date of the transaction. All other records required under a) to h) above, must be retained for 6 years from the date the relationship ends. Consumer records are not required to be kept in a single location but must be complete and readily accessible.




A DMC may pay a fee, commission, other reward or remuneration only to a person that is: a) a regulated entity; b) a certified person; c) an individual for whom a DMC has taken full and unconditional responsibility; d) an entity specifically exempt by law from requiring authorisation; e) an authorised “credit intermediary” (within the meaning of the Consumer Credit Act 1995); or f) a financial services provider operating in the State in accordance with freedom of services or establishment provisions of EU law DMC Agents are included for under (c) see following section:



It is the practice of some DMC’s to accept applications for debt management plans and other products and services from third parties. Where a DMC has agreed with or licensed third parties to recommend and arrange the sale of its products and services to potential customers then it assumed the third party is acting as an agent of the DMC. In which case, this code applies to the agent. DMC’s must maintain a register of agents and provide them with letters confirming their permission to recommend and arrange for debt management plans. It is the practice of DMC’s to require a payment from the consumer on signing an application for a debt management plan. On no account should an agent accept payment from a customer of a DMC payable to the agent. All payments must be made payable to the DMC. Where cash payments are made then the agent must produce a DMC receipt for the monies. DMC agents will be required to comply with minimum competency requirements.




It is the intention to consider a debt management plan as similar to a retail financial product in which case a DMC and their agents will be required to comply with the Financial Regulators minimum competency requirements.



It is expected that any future DMC authorisation procedure will include for fitness and probity tests. In the interim compliance with this code will require DMC’s to comply with the Fit and Proper Requirements for Directors and Senior Managers.




A DMC must ensure that all its advertisements are fair and not misleading. An advertisement must not influence a consumer’s attitude to the advertised product or service of the DMC either by inaccuracy, ambiguity, exaggeration or omission. The name of the DMC publishing an advertisement must be clearly shown in all advertisements. The nature or type of the advertised product or service must be clear and not disguised in any way. An advertisement must be designed and presented so that any reasonable consumer knows immediately that it is an advertisement. The design and presentation of an advertisement must allow it to be clearly understood. Where small print or footnotes are used, they should be of sufficient size and prominence to be clearly legible. Where appropriate they should be linked to the relevant part of the main copy. Warnings and product specific information must be clear and must not be obscured or disguised in any way by the content, design or format of the advertisement. Any statement or promise contained in an advertisement must be true and not misleading at the time it is made and any assumptions on which it is based must be reasonable and stated clearly. Any recommendations or commendations quoted must be complete, fair, accurate and not misleading at the time of issue, and relevant to the advertised product or service. A recommendation or commendation may not be used without the consent of the author and, if the author is an employee of the DMC or a connected party of the DMC or has received any payment from the DMC or a connected party of the DMC for the recommendation or commendation, the advertisement must state that fact. Comparisons or contrasts must be based either on facts verified by the DMC, or on reasonable assumptions stated within the advertisement and must be presented in a fair and balanced way; and not omit anything material to the comparison or contrast. Material differences between the products must be set out clearly.


Some creditors have a blanket policy of refusing to enter into negotiations with some DMC’s or even refusing to accept payments sent by DMC’s on behalf of consumers. Where a consumer appoints a representative to negotiate on their behalf, it is an unfair and improper business practice on the part of the creditor to operate a policy, without reason, of refusing to consider such requests. Where a creditor wishes to refuse to negotiate with a particular representative, it must make its position known to the representative and also immediately inform any consumer on whose behalf the creditor is approached by that representative. Where payments are tendered, not by the debtor personally, but by someone acting on his/her behalf, it is a principle of law that creditors cannot refuse to accept those payments. The practice of creditors returning payments, or not crediting payments to consumers' accounts, purely because they are received through a DMC, therefore, is not acceptable. This is so even in circumstances where a creditor has indicated that it will not negotiate with a DMC acting as a representative of a debtor.



Some lenders, credit and mortgage brokers might want to refer consumers to DMC’s as potential clients. There is no objection to this provided it is done with the informed, prior consent of the consumer. Referrals must not be made without this consent.




A DMC must have adequate systems and controls in place to ensure compliance with this Code. Where the Financial Regulator requires a DMC to provide information in respect of the DMC’s compliance with this Code, such DMC is thereby required to provide information which is full, fair and accurate in all respects and not misleading and to do so in any reasonable period of time or format that may be specified by the Financial Regulator. Where the Financial Regulator requires information in respect of a DMC’s compliance with this Code, and the Financial Regulator is of the opinion that a meeting with personnel of the DMC is necessary in order to procure such information in a satisfactory manner, the DMC must use its best endeavours to arrange for appropriate personnel to participate in such a meeting in order to provide the required information to the Financial Regulator. A DMC must, upon being required by the Financial Regulator to do so, provide to the Financial Regulator records evidencing compliance with this Code for a period prior to such requirement as the Financial Regulator may specify (up to a maximum period of 6 years).