Debt management plan fees too high?
Many debt management plan (DMP) providers charge a fee for their DMPs. If you weren't given all the information about the fees for your DMP or the fees are making your situation worse, you might feel you're paying too much.
This page explains what you can do if you think you're being charged unfair fees for your DMP.
How much can a DMP provider charge?
There are no rules about how much a DMP provider can charge. However, providers do have to follow the FCA rules and guidance about being open and transparent about how much DMPs will cost. This is a condition of their FCA authorisation, which they're required by law to have.
In addition, no more than 50% of the money you pay to a DMP provider should be taken to pay the provider's fees - at least 50% should be passed on to your creditors, and this should increase after the first six months. The costs of administering your DMP should also be spread evenly over the DMP.
What were you told about the fees?
Just because you're unhappy with the fees you're being charged doesn't automatically make them unfair. Whether or not the fees you're paying for your DMP are unfair will depend on what you were told when you signed up for your DMP.
The fees may be unfair if any of the following apply to you:
- the DMP provider only told you about the savings you'd make each month without telling you that you might end up paying more in total for a longer period of time
- the provider didn't tell you that a fee would be charged
- the provider didn't tell you what fees would be charged, such as a fixed charge, fee, deposit or periodic management fee
- the provider didn't tell you how much you'd end up paying in total and over what period of time
- the provider didn’t tell you how much of what you pay will go towards paying its fees and how much will go to your creditors
- the provider is taking more than half of your payments towards its fees
DMP providers have an obligation to give you all of this information before you sign up. If your provider didn't, they might be breaking the FCA rules and you can make a complaint.
What can you do about unfair fees?
If you think the fees your DMP provider is charging are too high, there are several things you can do:
- complain directly to the DMP provider - they are obliged to respond to your complaint promptly and fairly
- complain to the Financial Ombudsman Service (FSO), if you're not happy with the response from your DMP provider
- think about cancelling your DMP and choosing a free provider instead
The DMP provider has 8 weeks to provide a final response. If you’re not happy with their response, you should go to the FOS within 6 months of either:
the final response
- the end of the 8 week period if you didn’t get a final response
If you're considering cancelling your DMP, make sure you check your contract carefully to see what it says about whether you'll get a rebate of some of the fees you've paid.
If your DMP fees are increasing your debt
Even if the fees you're paying are fair, they may still cause you problems. If your provider is taking a fee from your monthly payment, that means there's less money to share between your creditors, so it can take longer to pay off what you owe.
If you're worried that the fees for your DMP are increasing your arrears or making it harder for you to get out of debt, you could think about cancelling your DMP. You can do this even if the fees you're being charged are fair, as a DMP isn't a legally binding agreement.
You can find more about rules DMP providers have to follow in the FCA Consumer Credit Sourcebook on the FCA website at www.fca.org.uk.