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People are becoming slaves to DMPs 8 March 2010


Debt management plans, which were originally introduced in the industry as a short-term repayment plan, are unregulated and have no set length of time or limit on the amount of debt. 

R3 trade body said that on average individuals in a DMP earn £1,400 a month and pay back approximately £250 a month.

With 26 per cent of DMPs lasting ten years or more Peter Sargent, R3 president, argued that inappropriately lengthy plans meant people are becoming "slaves to their debts."

He said: "DMPs can play an important role in offering manageable solution to individuals who are able to pay back their debts. However the sheer length of some plans indicates that the amount of debt these individuals have is too large for a DMP."

The research also shows that 46 per cent of insolvency practioners have seen DMPs fail because the monthly repayments were too high. 

While 35 per cent of individuals said that other options for dealing with their debts, such as an individual voluntary arrangement, or bankruptcy was not discussed before entering a DMP.

And 22 per cent of people in a DMP say that they were not asked for proof of their income or expenditure before their plan began.

Sargent said: "It is incredible that organisations set up DMPs without these vital details. If this information is not verified at the start the monthly payments may be set too high – dooming the plan from the outset."

Sargent added that one in three individuals currently in an IVA were previously in a DMP, as were the same proportion of undischarged bankrupts. R3 said that this suggests that in certain instances, DMPs can prolong distress rather than solving the problem adding that another solution would probably have been more suitable from the star




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