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, with the aim of reaching an agreement 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 themselves. In the past, creditors routinely rejected offers made by clients unless they were made by an advice agency, even though it was the same offer and based on identical information.
If the client has authorised you to negotiate with a creditor on their behalf, the Financial Conduct Authority (FCA) forbids creditors to refuse to do so or to contact clients directly and bypass their appointed representatives.
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 financial difficulties or debt problem, bearing in mind that the client’s best interests are paramount. If the client is going to make payments, ensure that they do not offer more than they can afford.
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, the creditor will likely want to reach a settlement.
Debt advisers may want the creditor to accept payments or write the debt off.
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 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 Common Financial Statement (see here). Creditors should accept figures if they are within the spending guidelines and any figures above the guidelines can be explained. You should support your arguments by referring to any relevant code of practice or section of the FCA Handbook (generally, the Consumer Credit Sourcebook1).