About Debt Management Plans


A debt management plan is an informal type of debt solution. It cannot force your creditors to freeze interest and charges as soon as your DMP begins.


This is in contrast to personal insolvency debt solutions that enforce the suspension of interest and charges right from their beginning.


Most creditors do actually agree to stop adding interest during debt management plans, even though they are not legally obliged to. In this article we explain why this happens.


Regulation About Financial Difficulty


Most debts placed into debt management fall into the category of “consumer credit”.


Consumer credit includes debts like credit cards, unsecured loans, bank overdrafts, and catalogue accounts.


Consumer credit lenders are regulated by the Financial Conduct Authority which sets clear rules about the treatment of borrowers in financial difficulty. The FCA rulebook for lenders includes the following statements:


“Examples of treating a customer with forbearance would include…”


“considering suspending, reducing, waiving or cancelling any further interest or charges (for example, when a customer provides evidence of financial difficulties and is unable to meet repayments as they fall due or is only able to make token repayments, where in either case the level of debt would continue to rise if interest and charges continue to be applied)”.


Starting a debt management plan is clear evidence that you are experiencing financial difficulty.


Once lenders become aware of the DMP they’re likely to freeze interest and charges to meet the expectations of their regulator.


Code of Conduct


Banks and other types of lenders have also come together to create their own code of conduct called the Standards of Lending Practice (PDF) which covers the treatment of customers in debt. The document states that,


“Firms should consider freezing or reducing interest and charges when a customer is in financial difficulty.”


This statement further emphasises that stopping interest and charges is both likely and appropriate once a lender becomes aware of their customer’s financial difficulty.


The Importance of Frozen Interest


The estimated length of a debt management plan assumes that interest and charges are stopped by all creditors.


If a creditor continues to add interest and charges a DMP might last much longer than initially expected. It’s even possible that the overall debt level could increase rather than reduce.


If a Creditor Refuses to Stop Adding Interest


Creditors should be challenged via their complaints process if they refuse to stop charging interest after they’ve been made aware of your financial difficulty.


If your complaint is rejected by the lender you can raise the matter with the Financial Ombudsman Service. If they consider that you’ve been treated unfairly the lender may be required to remove interest and charges from your account balance.


You also have the option to switch to a different debt solution that forces your creditors to freeze interest and charges on the debts (see below).


Other Types of Debt Solutions


If you live in Scotland you can use a different type of a debt management plan known as the debt arrangement scheme. This debt management solution guarantees that interest and charges will stop provided you keep up with the payments.


Entering a personal insolvency process almost always results in no further interest or charges being added to your debt by creditors.


Personal insolvency processes in England, Wales, and Northern Ireland include:



Debt Relief Order



Personal insolvency processes in Scotland include:


Protected trust deed



Interest may get re-added during a personal insolvency process if your financial position improves dramatically before you get discharged. This most commonly occurs when someone receives a lump sum of money (or valuable property) via an inheritance or some other means.


Get Debt Management Advice


Bright Oak has operated debt management plans since 2007.


Our experience is that the vast majority of creditors are willing to freeze interest and charges on our customer’s debts when we ask them to. Interest might not be frozen immediately but it’s rare for it to continue for a significant period of time.


A suspension of interest and charges cannot be guaranteed however, as each creditor must make their own assessment of your financial difficulty and then choose how to respond.


For advice about starting a debt management plan please contact us.


You’ll be assisted by a friendly, experienced, and fully qualified debt adviser.



Author: Andrew Graveson

Qualified Debt Adviser & Bright Oak’s Founder


Page Last Updated: 25/07/2020


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