Notes for Guidance - Money adviser - Debt Arrangement Scheme

This section was provided by the money advice sector to assist any money adviser. It provides information on what should be considered prior to a client applying for a DPP.

It is advisable you maintain accurate records, as you may have to provide additional information to the DAS Administrator to assist the client’s application. 

Record keeping

It is recommended you keep accurate and regularly updated records showing:

• all work undertaken
• all contact with the client and creditors
• detailed records of advice, information and options provided to the client
• courses of action decided upon
• copies of correspondence, income verification, letters of authority and notes which demonstrate the client’s involvement in the process 
• a signed authority from the client to act on their behalf

Initial interview phase

The initial interviews with the client should:

• work to establish a relationship
• establish the ‘ground rules’ by explaining to the client what your role is and what you can and cannot do
• tell the client what your organisation’s role is and what it can and cannot do
• explain in a clear manner what role the client has to play in the process and what you expect of the client. This will include:

• • full disclosure of debts, income, expenditure and assets
  • informing you of any action currently being taken by creditors to recover the debts
  • compliance with any condition set by the DAS Administrator (standard or discretionary) 
  • informing you when any future or contingent debts become quantified and due for payment

During the initial phase, you must also:

• gather relevant information. This should include information on the client’s personal, health and family circumstances, taking into account any religious or cultural context
• gather financial information and verify income. It is essential payslips or bank statements are checked and income fully verified
• ask to see any correspondence relating to benefit or tax credit entitlement
• ensure assets are defined and their value noted, including equity in heritable property. This information may be needed if a client applies for a DPP and a discretionary condition is stipulated. You do not need to assess the equity in the client’s home unless the client wishes to include the sale or re-mortgage of this property as a discretionary condition. This is entirely the client’s choice. It is recognised money advisers are not qualified valuers. If there are receipts for any assets, or if information is available about value (for example, Glass’s guide to used car prices), they should be used as a rough guide. It may be that you have to accept the client’s estimate of the value of any property

Non-essential assets

Schedule 2 of the Debt Arrangement and Attachment (Scotland) Act 2002 gives details of non-essential assets. You should advise the client there is a risk that the DAS Administrator might impose a condition that these assets be realised. Please note, a discretionary condition requiring the client to sell or re-mortgage their home will only be imposed if the client has voluntarily offered this.

During this stage it is essential you provide crisis intervention (if needed) and where possible, maximise the client’s income and advise the client of ways of minimising expenditure.

You must also ensure:

• a full list of creditors is compiled, including account numbers, addresses, and telephone numbers
• the creditor is correctly identified and the client has not supplied the name of a collection agency by mistake (unless the debts have been sold on by the creditor to the debt collection agencies)
• priority and non-priority debts are identified and dealt with accordingly
• the client’s liability for the debt is checked (whether it is single or joint and several) and
• the creditor has complied with the Consumer Credit Act 1974. You should obtain a copy of the credit agreement to check and confirm the terms, and whether the agreement has been properly executed

Mandate of authority

You must ensure the client has signed a mandate of authority authorising you to act on their behalf. On the mandate you must include:

• the client information exactly as it has/will be added to eDEN – i.e. if the client has a middle name or initial this must show on the mandate
• full details of the acting money adviser (individual)
• your organisation’s name and address and
• the payments distributor name

Credit

You should also discuss the issue of credit with the client. In particular you should draw their attention to:

• the consequences of taking out further credit, other than that permitted by the Regulations
• the possibility of surrendering credit cards and
• the possibility of asking their bank to withdraw their overdraft facility

Income and expenditure

You must:

• discuss expenditure with the client and calculate their expenditure, preferably on the same basis as the client budgets or receives income or benefits –e.g. fortnightly, four-weekly or monthly.  At this point the figures may only be approximate
• ask the client for copies of utility bills, etc. to ensure the client is giving correct information. Please note the supply of energy is a reserved matter and it is open to the energy companies to recover arrears by means of installation of a pre-payment meter.  In general, however, energy companies will not do so where a DPP is agreed.  Where a pre-payment meter is already installed, individual circumstances will dictate whether incurring the costs of recalibration or replacement is sensible
• use the Common Financial Tool to assess a client’s income and expenditure and to calculate if there is a surplus available to make contributions
• involve the client, who should participate in the completion of the income and expenditure form
• agree with the client how much of the surplus income will be offered as a contribution to the DPP and
• allow sufficient time to scrutinise the information provided by the client, to ensure detailed consideration and a realistic view of their expenditure

Relevant debts

You must also confirm details of relevant debts with the creditors through eDEN or by other means (enclosing a scanned copy of the client’s signed mandate). This should ask for verification of:

• the principal debt
• the interest rate
• the term
• contractual payments
• the number of payments outstanding
• the balance outstanding
• the amount of arrears
• any charges that may be incurred (for example, default charges) 
• details of any existing payment protection

This correspondence might also contain a request the interest is waived and not re-applied or, at the very least, frozen during the period you are preparing the DPP application.  At this stage, this would be a voluntary action by the creditor.

If contacting the creditor by letter, it is of paramount importance you include an original mandate with the client’s signature, giving authority for you to act on their behalf.  If using eDEN, you need to attach a scanned copy of the signed mandate to enable creditors to provide you with the necessary information. 

After the first interviews

You must:

• collate and check information received from the creditors and
• where it is apparent that the creditor has not complied with the Consumer Credit Act 1974, take appropriate advice and action as required (for example, contacting Trading Standards Departments to investigate a possible breach of the Consumer Credit Act)

You must also:

• compile a list of creditors showing the debt outstanding to each individual creditor and the total outstanding debt to all creditors
• if the client has contractual agreements with creditors (for example, HP) obtain details of length of the agreement and payment amounts
• prepare a realistic detailed income and expenditure form using the CFT, taking into account the client’s personal, health and, where appropriate, family circumstances
• calculate the level of surplus income (if any) available for distribution to creditors, and the amount the client wishes to offer as a contribution to the DPP and
• determine all the options available to the client in order to assist them to decide on an appropriate course of action. These options might include:
  • advice about budgeting
  • supporting the client in making informal arrangements with creditors
  • assisting the client to seek agreement with creditors on composition of their debt or to waive or freeze interest charges
  • assisting the client to apply for bankruptcy
  • advising the client to seek further advice from an insolvency practitioner about granting a trust deed which could become a protected trust deed
  • entering into a voluntary debt management plan or
  • applying for a DPP under DAS

In advising the client of all the viable options available to them, you must:

• ensure you give them enough information in a clear, easily understood form so the client can make an informed decision about the appropriate course of action
• ensure the client fully understands the consequences of each option
• provide honest, clear and unbiased advice, information and support at this stage to the client and the options