Debt Management Training Module

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Introduction

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Debt Management

Debt Management involves an informal agreement with your creditors to

reduce your debt repayments to a level you can comfortably afford

► Net income less your essentials = disposable income

► Negotiate with creditors

► No legal costs

► One payment to Immaculate

► The payment is divided proportionately between creditors

What is Debt Management► Immaculate offers people an alternative method of clearing

their existing credit commitments through what is known as a Debt Management Plan.

► Firstly we assess their current situation, by running through all the debts that they are currently trying to pay.

► The next step is to run through their income and expenditure figures, to see what they can really afford to be paying towards their debts.

► The end result is a clear picture of how our client is coping with their finances at present.

► Immaculate can now help the client by offering them a consolidation programme (based on assessed circumstances)

► This involves constant contact with them, showing them the clients’ change in circumstances and more importantly updating the client on this progress.

The Debt Management Programme

►A re-payment programme works by offering the client more structure to their outgoings and a more affordable monthly payment.

►We take control of that monthly payment and distribute every month to our clients’ creditors.

►The process itself is not so simple; we take responsibility for negotiating the new level of payment with the clients’ creditors. We also are responsible for trying to get interest & charges reduced or frozen and additionally the ongoing maintenance & reviews of the clients file.

The debt management programme

► We also negotiate with the creditors the reducing or freezing of any interest or charges that are currently applying to the clients’ account.

► By doing this we can give the client a more sensible re payment time overall, as the lower payment being made is not being eaten up by charges

► All companies who lend money are aware of what debt management companies do, they also realise that a persons financial situation can change, which in turn affects their ability to make the contractual payments.

► We will continue to act on our clients’ behalf until they are debt free, their account with ourselves is reviewed every 6 months and the creditors will be updated of any change.

► To assist with the running of files we have PFM staff (Personal Finance Managers) Creditor Liaison staff (who deal with creditors only) & a credit control team.

The programme benefits

► For most clients’ who are struggling, this is a solution that will give them, not only money in their pocket but more structure to their financial situation.

►Thus enabling them to enjoy a better lifestyle with less emphasise on their debts.

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Advantages of Debt Management

► No more debt collectors on your back

► Flexibility to change as your circumstances

change

► No more penalty charges

► No legal proceedings

► Does not put your home at risk

► No permanent black marks against your name

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The situation right now

► Behind on your monthly outgoings

► Struggling with mortgage, school fees, utilities and food

► Only making minimum payments on clothing accounts, store cards and credit cards

► Debt collectors are harassing them

► Feeling ashamed and dodging the phone calls

► Embarrassed to admit they are in trouble

► Final demands arrive by post

► Worried about legal action and the costs

What are debts?

►A debt is an outstanding balance that a person owes to either another person or a company.

►This is done in the form of something called a credit agreement or personal lending.

►Each type of credit that a person takes out is done through a finance company, either an independent company or a bank.

►The bank or independent company will make their money back by charging their customer an interest charge, which is an extra amount on top of the original credit figure.

Debt examples…

►Mr Jones has borrowed £25000.00 from a bank; they will get their money back monthly, over 7 years.

►Mr Jones would actually end up paying the bank a total of £39000.00 over the 7 years; this is how the bank makes extra money for giving you your lump sum of cash.

►There are different styles of credit that a person can take out; the following slides are a few examples…

Debt examples…

►Personal Loan►A loan is a lump sum of cash given to

a person for any purpose i.e. to buy a car, go on holiday or to clear other debts.

►Whatever company lends the money will pay that sum into the customer’s account for them to spend as they choose.

Debt examples…

► Credit card► A credit card is a form of credit that allows you to

make several purchases up to a certain limit (that has been decided by the card issuer)

► You then re-pay for these with a smaller payment each month when your statement arrives.

► You can generally use a credit card anywhere, which makes it a very easy way to pay for goods.

► A credit card will charge you a monthly interest rate on top of the balance you owe.

► Store card► A store card is similar to a credit card except you

can only use it in certain stores i.e Mothercare, Next etc.

Debt examples…

►Catalogue►A catalogue is a company that sells goods

and clothing via a brochure (some have high street stores) You order goods from the catalogue company, then have a choice, either pay the balance once you get the goods or alternatively pay for the goods at a small monthly instalment.

►Again if you did not clear the balance in one go you would be charged a monthly interest fee.

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Debt Manager

► Freeze or reduce interest, or

► Stop repayment penalties, or

► Write off part of your debt, or

► Extend the loan repayment terms

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Not included

► Secured loans► Leases (property)► Hire purchase► CSA / Maintenance arrears► Car loans (if secured against the car)► Rent► Council Tax arrears► Student Loan repayments

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Battle A

Foot in the door – deliver the main benefit to the client

Typical objections

Where are you calling from? Who is speaking? I am not interested. What is this concerning? She is not available, what is this about?

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Battle B

Details of all debts

Until the client understands what the benefit is to them

and you have built up enough trust, he will not give you

details of all his debts

Typical objections

I don’t have any debts.

I am fine thanks.

I have someone who is dealing with it.

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Battle C

Passing on to an Advisor

Again the client must understand what the benefit is to

them to speak to an advisor and start the process.

Highlight that minimum payments will not pay off the loan,

so ten minutes with and advisor could save many years of

interest.

Typical objections

I don’t have time right now, could you call me back

later?

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Lines worth learning

► Hi Mr Smith, my name is Danielle calling from Immaculate

Who is this?

Where are you calling from?

What is the name of the company?

► Mr Smith, it is Danielle from Immaculate, it is nothing to be

concerned about, but we believe you may be paying too much

interest on things like credit cards and store cards. Is it only

credit cards you are dealing with, or store cards too?

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Lines worth learning

► Hi Mr Smith, it is Danielle calling from Immaculate. The reason

for my call is to make you aware of new government

legislation to help families during the credit crisis. If you are

dealing with credit cards and personal loans and struggling to

make ends meet, you might well be eligible for a programme

to reduce your monthly repayments. Is it only credit cards you

are dealing with, or personal loans as well?

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Lines worth learning

I am not interested

► Mr Smith, I am not trying to sell you anything. I am merely

here to extend a helping hand to people who are struggling to

make ends meet. Many people are only making the minimum

payment on their credit cards, which means the amount on

the statement every month just never seems to come down.

Let me suggest something, if you give me details of your

loans, I will give you an example of how it works. If you don’t

like what I have shown you, my advice was free.

Minimum Criteria for a Debt Management Lead

1. Are you currently struggling with Debt? Only those leads responding YES to this question will be supplied. 2. How much contractually should you pay on your unsecured debts each month? A minimum of £150 per month qualifies for a Debt Management Lead, 3. Do you have a minimum disposable Income of £150? Only those confirming that they have at least £150 will be supplied as a debt management lead 4. How many unsecured creditors do you owe money to? For Debt Management Leads This will be a minimum of 2. 5. Do you have time to talk to an advisor? Only those confirming that they have time will be supplied as a debt management lead 6. You are not already in a debt management plan or IVA? Only clients confirming that they are not in an existing debt management plan or IVA will be supplied as a debt management lead

Examples & Glossary

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Bank Overdrafts

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Credit Cards

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Store cards, Catalogues and Mail Order Accounts

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Store cards, Catalogues and Mail Order Accounts

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Unsecured loan shops (Payday lenders)

399% APR

189% APR

260% APR

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Glossary

Debtor Someone who owes you money

Creditor Someone you owe money to

Net Income After tax

Gross Income Before tax

High Street Stores

Main Street

Utilities Water, Electricity, Gas

Mortgage Home loan

Secured loansLoan against a fixed asset, something you can see and touch

Unsecured loans

Loan against your future income only

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Hire purchaseHP agreement, like car finance and lease agreement.

Council tax Rates and taxes

Wages Salary

Credit ratings/scoring ITC checks

Bailiff Sheriff of the court

CCJ (County Court Judgement)

Judgement from a magistrate’s court

Defaults/arrears Where a debit order did not go through because of lack of funds, or you are behind on payments

Discharged from bankruptcy

Rehabilitated insolvent

Reduce existing commitments

Bring your expenses down

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DLA Disability Living Allowance

LTV Loan to Value

CSA maintenance

Child support maintenance

CataloguesCompanies that sell there goods through catalogues or online

Store CardsRetailer cards that give you payment plans that are not linked to Visa or Mastercard

Personal loan Cash loans unsecured

ProvidentCash loans unsecured from a lender called Provident

Letter of demand

Final demand

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Raise extra finance

Increase your loan

Monthly outgoings

Expenses, debit orders, monthly repayments of loans

Essential outgoings

Essential expenses like Water, food, gas, electricity, school fees, Tube/Bus ticket

Debt Management

Informal arrangement with creditors

Debt consolidation

Combines all your debts into your mortgage

IVA Individual Voluntary ArrangementBankruptcy Insolvent

Student loansGovernment loans, cannot be put under debt management

APR Annual Percentage RateCompound Interest

Calculate interest daily, interest on interest

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Capital Sum The original amount of the loan

InterestThe amount you pay back on top of the loan amount

Loan Period Time it takes to pay back the loan

Total amount of loan

Total paid back over the loan period. Add all payments made during the period of the loan

Informal Agreement

Not a legally binding document

Formal Agreement

Legally Binding document

Call Recordings

Call 1

►The Agent gives a very good intro to the call and try’s to promote conversation, the client however doesn't present any buying signals nor does he give any signals that he may qualify for debt management, the agent then wraps the call up in a professional manner.

Call 2

►Excellent intro to the call and straight to the point….”would you say you are paying more than £150 per month to credit cards and loans”? The yes that the client responds with gives the agent the opportunity to highlight qualification on criteria and sell the benefits of an advisor conversation…..

Call 3

►Good Fact Find from agent, mentions recession at the start of the call….looks for buying signals and then highlights qualification, again selling the discussion with an advisor following criteria checks. Good well paced call, doesn't come across as selling at any stage of the call!!

Call 4

►Mentions the minimum criteria of £150 per month paying out and highlights some good buzz words….”!Qualify” ”Interest frozen” “Cost of living going up”…..another fine example of a structured call….well paced and highlights the benefits of debt management continuously throughout the call as well as speaking with an advisor…before handover to an advisor the client is told what will happen next! Good handover

Call 5

►Again the agent mentions the minimum criteria to initiate conversation, then highlights the qualification benefits! Its an easy way to identify a potential client and promotes conversation, that’s if the closed questions goes the correct way….its early in the call so asking for definite figures at this stage can promote defensive responses! Good use of closed questions.

Call 6

►Great intro….good high level wording, the client doesn't qualify though and the call finishes…..you will get more of this call than any other!

Call 7

►Client has debts and has moved into a Debt Management programme, you will also come across call like this also. Nothing can be done with this client at this stage, some additional training required for this model. End the call and move onto next call.

India call 1

►The agent makes the initial part of the call heavy….

►Golden rule number #1 for Debt Management Lead Gen….. “Telling isn't selling”

►Try and avoid any unsure conversations….get to the points made in the earlier training calls quickly and sell the benefits of speaking to an advisor

► “ you may qualify to have your interest frozen”

India call 2

►Again its way to long at the start of the call… the accent is poor quality also!

►The agent does get buy in but only because the client is amiable….most clients are different, more defensive and aggressive!

►You will notice the agents uses £200 as a outgoings benchmark….this creating a safety net if it falls below this mark on advisor conversation.