2. Negotiating
Negotiation is a process of communication between the debt adviser or client and the creditor. It takes place over a period of time, after which an agreement is made that both sides find acceptable.
A decision must be made about whether it is appropriate for you to carry out the negotiation or whether it should be done by the client. Sometimes, it is more empowering for an adviser to support a client by providing, for example, a financial statement and some standard letters, rather than negotiating her/himself. In the past, creditors routinely rejected offers made by clients unless and until they were made by an advice agency, even though it was the same offer and based on identical information (but see below).
If the client has authorised you to negotiate with a creditor on her/his behalf, the Financial Conduct Authority (FCA) forbids creditors to refuse to do so or to contact clients directly and bypass their appointed representatives.1FCA Handbook, CONC 7.12.2R and 7.12.3G Similarly, creditors should not refuse to deal with clients who are attempting to negotiate their own repayment arrangements. A creditor who refuses to negotiate with an adviser or a client without a justifiable reason should be challenged. You should conduct all negotiations with the aim of resolving the debt problem and bearing in mind that the client’s best interests are paramount. If the client is going to make payments, ensure that s/he does not offer more than s/he can afford.2FCA Handbook, CONC 8.2.2G(2) Advisers are often in a powerful position in relation to creditors because no one in the credit industry wants to be accused (particularly publicly) of acting illegally or oppressively. If a debt adviser from a well-respected local or national agency contacts a creditor to negotiate on a client’s behalf, it is likely that the creditor will want to reach a settlement. In some cases, an adviser’s power is increased because debt advice may lead to payment and, in others, because the creditor realises that a debt cannot profitably be pursued. This does not mean that creditors should routinely be expected to agree to every proposal that you put forward. On the other hand, if you think that the creditor is being unreasonable and/or unrealistic, consider referring the matter to a more senior person in the creditor organisation with a view to using the creditor’s complaints procedure and ultimately referring the matter to the Ombudsman, if necessary. When confirming the client’s financial situation to creditors, you should use the Standard Financial Statement. Creditors should accept figures if they are within the spending guidelines and any figures above them can be explained (see here). You should support your arguments by referring to any relevant code of practice or section of the FCA Handbook (generally, the Consumer Credit Sourcebook – see here).