Cancelling your debt management plan
A debt management plan (DMP) isn't legally binding, so you can cancel it if you feel it isn't working for you. However, you may not get a refund of your fees and you'll need to make sure you have another way of dealing with your debts.
This page explains what to think about before cancelling your DMP and how to go about doing it.
When you enter an agreement for a DMP, you should be given information about your right to cancel, an explanation of whether you'll get a refund of any fees, and whether you will be charged a cancellation fee.
If you're not given this information, your DMP provider may be breaking the conditions of its FCA authorisation. You can make a complaint.
Can you cancel a DMP?
A DMP isn't a legally binding agreement. This means that you can cancel it if you want to. There are a number of reasons why you might want to cancel, including:
- you're not happy paying a fee each month which means there's less money left to pay your creditors
- the interest on your debts hasn't been frozen, so the problem is getting worse
- your circumstances have changed for the worse and you're struggling to make the payments
- you've come in to some money, perhaps through an inheritance or payment protection insurance reclaim, and are in a position to pay off your debts more quickly
- you're not happy with your provider.
Before you cancel
Before you cancel your DMP, you need to think carefully about what will happen next. Ask yourself these questions.
How are you going to deal with your debts now?
Before you cancel your DMP you should think about how you're going to deal with your debts afterwards. When you cancel, the provider will tell your creditors, so they might start charging you interest and late payment fees again, as well as expecting you to resume higher payments. You'll also have to deal with your creditors yourself again. Think about how you're going to cope with this.
You should think about other debt solutions that would help you to deal with your debts before you go ahead and cancel your DMP.
Will you get a refund of any fees?
Whether or not you can get a refund of any fees or charges from your DMP will depend on what your agreement with the DMP provider says. Check the terms and conditions carefully to see if you can get a refund of some of your fees.
If you entered the DMP agreement over the phone or on the internet, then it is classed as a distance sale which gives you extra rights. You will have a cooling off period of 30 days. During this time, you can cancel your DMP for any reason and get a refund of any fees you've paid.
Will you have to pay a cancellation fee?
Your provider should have given you information about cancellation fees when you first entered your agreement. These fees should be reasonable.
Are you cancelling because you were misled?
DMP providers have to follow certain rules as a condition of being FCA authorised. These include not misleading you and making sure you have all the information you need to make an informed decision about starting a DMP. If you believe your provider misled you, perhaps by making claims that weren't true or leaving out important information, you can make a complaint as well as cancelling your DMP.
Cancelling your DMP
To cancel your DMP, you need to contact your provider and ask to cancel. They will inform your creditors that the agreement has been cancelled, so you can expect to start dealing with them yourself again.