Legal for a creditor to refuse repayments from a Debt Management Company?

I

ivorystraws

Registered User
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Hi,

I was just wondering whether someone can clarify for me that it is legal for a creditor to be able to refuse repayments via a Debt Management Company as it is apparently their policy not to deal with Debt Management Companies that charge for their services?

Thanks!
 
Don't understand what you are saying - has the Debtor got a debt management company to look after paying his creditors (like MABS). Are they not paying the full debt - why would you not want to be paid?
Of course you can refuse if too little and you believe they have more money available - why not take the money without making any agreements just taking it as part payment if not the full amount.
 
Luckycharm said:
Don't understand what you are saying - has the Debtor got a debt management company to look after paying his creditors (like MABS). Are they not paying the full debt - why would you not want to be paid?
Of course you can refuse if too little and you believe they have more money available - why not take the money without making any agreements just taking it as part payment if not the full amount.
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Wow, thanks for the quick response!

Sorry if I wasn't clear. Basically, you're interpretation is correct i.e. the Debtor has indeed got a Debt Management company to help look after his debts so they pay a lump sum to the Debt Management Company and the company negotiates, communicates and disperses the money to the creditors on the clients behalf. Essentially they're exactly like MABs except they charge a small fee. The debtor can approach MABs but they are absolutely so unbelievably busy these days but the option is there. Yes, due to their circumstances, they are unable to pay the full debt to all creditors.

However, this particular creditor in question (Permanent TSB) has a policy whereby they don't deal with debt payments via fee charging debt management companies so I was wondering whether this is actually legal as they are returning all debt payments and threatening legal action!!?

There is medical and (non)employment proof available that this debtor has not got the available funds but are paying all creditors what they can afford and all other creditors are accepting the re-negotiated repayments.
 
It is legal, but any payments made or attempted to be made but refused by the creditor would certainly count in your favour if they do manage to get you in front of a judge.

I would suggest that any payments that you are able to make to them if refused that you put them on deposit with another financal institution or credit union so that they are available when you get to court.

If you use the credit union you may have enough of a history and shares built up by the time it gets to court to raise some extra cash to bring it to a conclusion without a judgement.

non legal opinion only, good luck
 
number7 said:
It is legal, but any payments made or attempted to be made but refused by the creditor would certainly count in your favour if they do manage to get you in front of a judge.

I would suggest that any payments that you are able to make to them if refused that you put them on deposit with another financal institution or credit union so that they are available when you get to court.

If you use the credit union you may have enough of a history and shares built up by the time it gets to court to raise some extra cash to bring it to a conclusion without a judgement.

non legal opinion only, good luck
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Thanks number7 for your response! I realise there will be a paper and electronic trail for debt repayments which were attemptively made to the creditor and it will help. Good suggestion about putting the rejected repayments on deposit or invested. However, in the interim, if this is legal, would it be worth the debtors while to report the creditor to the financial regulator or ombudsman or is there any point in doing that?
 
If I was a creditor I would refuse to negotiate with anyone charging a fee for the service, as it reduces the money available to pay me. In general, these fee charging debt advisors have a bad reputation. They are not regulated as far as I know.

If I was a creditor, I would want to talk directly to the borrower and deal with them. I am the secured lender so I don't have to participate in any debt settlement, especially if the LTV is below 100%.

If someone pays in money on behalf of a debtor, I would accept it. But if the debtor was in arrears I would pursue them for the arrears or ask them to come in and talk to me.

Permanent tsb are being very ethical and responsible in their approach, other than not accepting the actual payment.
 
PTSB may have a policy of not accepting payments from debt managers but a bank would be on a sticky wicket if a debt manager is acting as an appointed agent for their client and the bank is made aware of this.

Debt managers act on authorisations from their clients (debtors) to make payments on their behalf to their multiple unsecured creditors. They charge a fee for the service which is more often a % of the amount paid or alternatively a flat fee based on the number of creditors. Unsecured creditors may discontinue legal debt collection or continue with it - generally they realise they are being paid what the debtor can afford and discontinue legal debt collection. They also realise that rushing to be the first in the queque court ordered instalments can be self-defeating given the costs involved etc.

Debt management services are unregulated here. They are licensed and regulated in the UK by the OFT where the sector has long established reputable firms operating under regulatory guidlines and approved codes of conduct. These firms provide voluntary debt management agreements and are also involved in providing IVA services (non-court based personal insolvency regime).

The commercial debt management business model shares costs between debtor and creditor. In countries, where well established, creditors recognise the process is cost effective when compared to traditional debt collection activities. And are prepared to consider earned disharges or debt write downs where agreements are adhered to.

MABS is a free service to both the debtor and creditor but who is funding MABS - the taxpayer. In effect the taxpayer is subsidising costs that creditors should be paying for. Which may be one of the reasons why a bank would have a policy of not accepting payments from debt managers - if they do then they are bearing the cost through lower payments then they think they would achieve either in the courts or through a tax payer funded system such as MABS.

@brendan : are you confusing debt advisors with debt managers - the latter arrange for agreements to pay mutiple unsecured creditors. Why is a policy of not dealing with debt managers ethical and responsible? It could be self-interest could it not?
 
Brendan said:
If I was a creditor I would refuse to negotiate with anyone charging a fee for the service, as it reduces the money available to pay me. In general, these fee charging debt advisors have a bad reputation. They are not regulated as far as I know.

If I was a creditor, I would want to talk directly to the borrower and deal with them. I am the secured lender so I don't have to participate in any debt settlement, especially if the LTV is below 100%.

If someone pays in money on behalf of a debtor, I would accept it. But if the debtor was in arrears I would pursue them for the arrears or ask them to come in and talk to me.

Permanent tsb are being very ethical and responsible in their approach, other than not accepting the actual payment.
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Thanks for the response Brendan. So in this situation, if you were a creditor, you would refuse to deal with a debt management company who charge a fee for their services who are negotiating on behalf of a client who is unable to negotiate and does not have the funds available to make the stipulated payments? This doesn't make any sense at all?? Even if you speak to the debtor directly (if they were in a position to do so healthwise), what would change? The debtor still has to make affordable repayments to all creditors in a fair way i.e. the same percentage of each debt as a repayment to each creditor (as long as it's affordable to the creditor).
No debt management service is free, including MABs (as kplan has mentioned). Even if the service of the debt management company was free, you get what you pay for!!
It's irrelevant if the LTV is less than 100% because you can't get blood from a stone. If there's no asset's, insufficient income and too many liabilities, you accept what the creditor can afford or get a judgment against them (if that'll make a difference).

In summary, I disagree with your statement and it seems obvious to me that Permanent TSB are not being ethical or responsible in their approach but rather illogical and dare I say it, nearly as bad as MBNA in their debt collection efforts! However, I do agree that anyone charging a fee for a debt management service obviously reduces the money available to pay creditor. In general, these fee charging debt advisors do a bad reputation (over 160 businesses and companies registered with the CRO to date) (but so do a lot of financial advisors, creditors etc) despite being regulated!
 
kaplan said:
PTSB may have a policy of not accepting payments from debt managers but a bank would be on a sticky wicket if a debt manager is acting as an appointed agent for their client and the bank is made aware of this.

Debt managers act on authorisations from their clients (debtors) to make payments on their behalf to their multiple unsecured creditors. They charge a fee for the service which is more often a % of the amount paid or alternatively a flat fee based on the number of creditors. Unsecured creditors may discontinue legal debt collection or continue with it - generally they realise they are being paid what the debtor can afford and discontinue legal debt collection. They also realise that rushing to be the first in the queque court ordered instalments can be self-defeating given the costs involved etc.

Debt management services are unregulated here. They are licensed and regulated in the UK by the OFT where the sector has long established reputable firms operating under regulatory guidlines and approved codes of conduct. These firms provide voluntary debt management agreements and are also involved in providing IVA services (non-court based personal insolvency regime).

The commercial debt management business model shares costs between debtor and creditor. In countries, where well established, creditors recognise the process is cost effective when compared to traditional debt collection activities. And are prepared to consider earned disharges or debt write downs where agreements are adhered to.

MABS is a free service to both the debtor and creditor but who is funding MABS - the taxpayer. In effect the taxpayer is subsidising costs that creditors should be paying for. Which may be one of the reasons why a bank would have a policy of not accepting payments from debt managers - if they do then they are bearing the cost through lower payments then they think they would achieve either in the courts or through a tax payer funded system such as MABS.

@brendan : are you confusing debt advisors with debt managers - the latter arrange for agreements to pay mutiple unsecured creditors. Why is a policy of not dealing with debt managers ethical and responsible? It could be self-interest could it not?
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Thanks kaplan, by far the best and most informative answer to date. In the grand scheme of things, it doesn't look like there's many options for the creditor apart from putting pressure on the debt management company to change, alter or include concessions in certain cases to the PTSB "policy".
 
Kaplan asked

@brendan : are you confusing debt advisors with debt managers - the latter arrange for agreements to pay mutiple unsecured creditors. Why is a policy of not dealing with debt managers ethical and responsible? It could be self-interest could it not?
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No, I don't think I am. Ivory Straws agrees that a lot of these firms are disreputable. Clients should be discouraged from dealing with them and maybe ptsb is helping the client be telling them to deal directly.

That way, there will be more available to pay the creditors.

From a self-interest point of view, the mortgage provider doesn't really need to participate in these settlements as the loan is secured.

I might be biased. Quite a few of these guys spam askaboutmoney offering their services or claiming to be satisfied customers. I am not going to waste time trying to assess which ones are reputable and which ones are not. I would just avoid them all. I suspect that PTSB has arrived at the same conclusion. They are telling the client " come in and talk to us. You don't need an intermediary".
 
Brendan said:
Kaplan asked



No, I don't think I am. Ivory Straws agrees that a lot of these firms are disreputable. Clients should be discouraged from dealing with them and maybe ptsb is helping the client be telling them to deal directly.

That way, there will be more available to pay the creditors.

From a self-interest point of view, the mortgage provider doesn't really need to participate in these settlements as the loan is secured.

I might be biased. Quite a few of these guys spam askaboutmoney offering their services or claiming to be satisfied customers. I am not going to waste time trying to assess which ones are reputable and which ones are not. I would just avoid them all. I suspect that PTSB has arrived at the same conclusion. They are telling the client " come in and talk to us. You don't need an intermediary".
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Yes, I definitely do agree that many, if not most of these debt management companies are disreputable and it's extremely difficult to get a trustworthy recommendation on any of them. However, this creditor has managed to employ a very reputable one and their reputation is reinforced by their previous work (which is in the public eye). However, I don't want to say too much about that since I've no link to them or to any such similar service, nor would I.
Please bear in mind this particular case has no bearing on Mortgage providers and as I've alluded to, the creditor is in serious ill-health and out of work. PTSB is aware of both these reasons! For them two reasons, I'd like to hear the excuses PTSB or anyone can make on this subject because it doesn't make sense to me... but I'm open to correction!?
Brendan, you simply can't say to avoid ALL Debt Management companies nor can you make any reasonable excuses for PTSB in this case.
 
I still believe that any judge that hears a case that involves a financial institution refusing partial payment will be very much in favour of the debtor when arriving at a decision on the case, weather the ptsb rule is there for self interest or supposedly the benifit of the borrower.

The banks are taking as hard a line as they can on defaults at present to try and ensure that others out there who may be in danger of default do the best that they can, the closer to a day in court a genuine defaulter gets the more likely a bank is to strike a deal particularly if there is consistant payment history.

That is why it is immperitive that anyone who can't afford their full mortgage payment when it falls due should pay as much of the monthly amount as they can even if that is without the agreement of their bank.
 
There's a bit of confusion here. Mortgage debt is not handled by debt managers - they manage unsecured debts - that is they negotiate reduced repayments with mutiple unsecured creditors. Reputable managers insist that priority debts are paid first (mortgage, utility, rent, some insurances) before any consideration of what disposable income is left to make payments to unsecured creditors.

Under the legal debt collection process if a creditor looks for a judgement and subsequenty an instalment order their applications are considered without reference to other unsecured creditors - which means creditors rush to get to the head of the queque -the real problem for debtors occurs when they owe many creditors but haven't the disposable income to pay them all in full - but they can make reduced payments to them all - but they are dragged into mutiple legal processes - reputable debt managers who have established reputations with creditors are recognised as providing a valuable cost effective service - which of course they make a profit from. Some banks might prefer to deal direct and refuse to deal with debt managers believing they can squeeze more from the debtors wallet more so if they also hold the mortgage and have the main bank account - I would tend to think this policy is designed in the banks best interest and somewhat abusive of creditor power.
 
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